The real effects of trade financing by export credit agencies

(Centre for Economic Policy Research, London, 9 February 2024) Trade finance subsidies, usually provided by export credit agencies, are the predominant tool of industrial policy. This column discusses the effect of the effective shutdown of the Export–Import Bank of the US (EXIM) from 2015—2019 on firm outcomes. It finds that firms which previously relied on EXIM support saw a 18% drop in sales after the agency closed, driven by a reduction in exports. Firms affected by the shutdown also laid off employees and curtailed investment. Overall, export credit subsidies can boost exports even in countries with well-developed financial markets, without necessarily leading to a misallocation of resources.