We show that supply-side financial shocks have a large impact on the investment decisions of firms. We do this by developing a new methodology to separate firms' credit shocks from loan supply shocks, using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for...

There are two principal theories of why countries or regions trade: comparative advantage and increasing returns to scale. Yet there is virtually no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework...

A striking feature of many financial crises is the collapse of exports relative to output. In the 2008 financial crisis, real world exports plunged 17 percent while GDP fell 5 percent. This paper examines whether the drying up of trade finance can help explain the large drops in exports relative...