Dollar financing and trade : Evidence from Chile
Given the rising use of the US dollar in international trade, this paper examines how dollar financing affects firms’ trade behaviors from the perspective of cross-currency basis, a country-specific proxy of dollar funding cost for firms located outside the US. Using firm-level data from Chile between 2003 and 2012, I find that easier access to dollar financing increases both firms’ exports and imports, consistent with the international “risk-taking channel” proposed by Bruno and Shin (2015). This study also conducts further analysis on demand and financial channels, which reinforces the significance of dollar financing in determining firms’ trade patterns.