Financial Development and International Trade
This paper studies the industry level and aggregate implications of financial development on international trade. I set up a multi industry general equilibrium model of international trade with heterogeneous firms subject to export entry costs and financial frictions, in which industries differ in their dependence on external finance. The model is parametrized to match key features of plant level data. I find that financial frictions have a large effect on the extent of international trade across industries, but a negligible impact at the aggregate level. I show that these findings are consistent with estimates from cross country industry and aggregate level data.