Research seminar: Alison Schultz (University of Mannheim, Tax Justice Network).

We would like to invite you to a research seminar by Alison Schultz (University of Mannheim, Tax Justice Network).

Paper: Broken Relationships: De-Risking by Correspondent Banks and International Trade

Authors: Lea Borchert (University of Mannheim), Ralph De Haas (EBRD, CEPR, KU Leuven), Karolin Kirschenmann (ZEW), Alison Schultz (University of Mannheim; Tax Justice Network)

Abstract: We exploit proprietary information on severed correspondent banking relationships (due to the stricter enforcement of financial crime regulation) to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins, and firms only partially substitute these foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often-overlooked function of global banks: providing the payment infrastructure and trade finance that enables firms in less-developed countries to export to richer parts of the world.

The seminar will take place on Tuesday, February 20, in Room 601 at 17:00.

The working paper is available at SSRN.

If you need a discussion slot with Dr. Schultz, please write to Miroslav Palanský, and he will try to find a suitable time on Tuesday.