University of Nottingham Ningbo China
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Trade Liberalization and Capital Flows: a Perspective of Credit Constraints on Heterogeneous Firms

09 October 2013 (14:30-16:00)

The School of Economics and The Nottingham Centre forResearch on Globalisation and Economic Policy (GEP) China are pleased to inviteyou to the following research seminar given by Dr. Guoxiong Zhang from ShanghaiJiaotong University:

About the seminar

We show that a firm's credit constraint as a result ofasymmetric information between the bank and the borrowing firms, a la Feenstra,Li and Yu (2012), depends on the firm's productivity when the firm's mark-up isendogenous. In a model with two symmetric open economies, the hybrid producers,which sell both domestically and abroad, have a tighter credit constraint thenthe domestic producers that only sell domestically. Their higher creditconstraints come solely from the fact that they have higher marginal cost thantheir competing firms in the foreign country. Partial equilibrium results showthat trade liberalization will reduces both the aggregate revenue and theaggregate loan demand for the domestic producers, and the reduction of theaggregate revenue dominates the aggregate loan demand. Also, following tradeliberalization, the hybrid producers will have lower aggregate revenue buthigher aggregate loan demand. Hence, overall trade liberalization tends toinduce capital inflow to acountry with credit constraints.


About the speaker

Dr. Guoxiong Zhang is currently an Assistant Professor ofEconomics in the Antai College of Economics & Management, Shanghai JiaotongUniversity. He earned his PhD from University of California, Irvine, and BA fromZhejiang University, both in economics. His current research interests includeInternational Economics, Monetary Economics and Econometrics (both Bayesian andclassical).  His research has beenpublished in Economics Letters, and so on.