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Crisis, Financial Costs, and Export Margins:Evidence from China
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TitleCrisis, Financial Costs, and Export Margins:Evidence from China  
AuthorChen Bo and Jing Ran  
OrganizationDepartment of International Economics and Trade School of International Business Administration Shanghai University of Finance and Economics;School of International Trade and Economics University of International Business and Economics,, 
Key Wordsfinancial costs, economic crisis, exports, intensive margins, extensive margins 
AbstractThe recent global economic crisis severely hits international trade. However, this downturn may affect intensive and extensive margins of exports differently. In this paper, we first analyze the data of China’s exports during the 2008—2009 financial crisis. We find that the financial crisis mainly hit the intensive margin of China’s exports; the extensive margin actually increased. In order to explain this surprising result, we extend Melitz (2003) model by allowing consumption heterogeneity and exporting firms to depend on external finance to cover their fixed costs. The model shows that albeit the exporting revenue of each firm (i.e. the intensive margin) unambiguously drops due to weaker foreign demand, the number of exporting firms (i.e. the extensive margin) may increase due to counter-measures taken by exporting countries, such as decrease in interest rates. We further simulate our analytical model and the simulated effects on intensive and extensive margins match the data well. 
Serial NumberWP434 
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