Why short-term finance matters (a lot more) to exporting firms

Aydan Dogan and Ida Hjortsoe

Exporting allows firms to access a larger market, but it also implies costs and risks. Some of these costs and risks are due to the time between production and sales generally being longer for exported goods than for goods sold in the domestic market. In our recent Staff Working Paper, we find that among UK manufacturing firms, exporters tend to have more liabilities than non-exporters, and we show that the link between short-term liabilities and labour costs is significantly tighter for exporters. This novel evidence supports the view that exporters’ short-term liabilities help cover costs and risks over the longer time period between production and sales. Consequently, financial conditions are likely to affect exporters more than non-exporters.

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Has the import price shock been worse in the UK or euro area?

Josh Martin and Julian Reynolds

How much have higher import prices increased consumer prices in the UK and euro area? This post explores this question using a framework grounded in some fundamental economic and national accounting concepts. Starting with the GDP price, we adjust for relative import and export prices to arrive at a consumer prices measure – this gives us a sense of the impact of import prices and the terms of trade shock on consumer price inflation. For the euro area, aggregating imports across member countries, which includes trade between members, risks overstating total imports and thus the effect on inflation. Using supplementary data to resolve this issue, we find that the euro area terms of trade shock has been larger than the UK’s.

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UK trade: going steady since the 1960s

Tommaso Aquilante, Enrico Longoni, Patrick Schneider

Countries’ goods exports are normally defined in terms of what has been shipped when and where. Recent literature (e.g. Besedeš and Prusa, 2011 and Besedeš et al, 2016) shows that looking at how long trade relationships have been in place is important as well. Using highly granular data, we show that over 60% of the value of UK nominal goods exports is in very mature trading relationships, by which we mean exports of a particular product between a pair of countries in a given year. This is true even with substantial churn (new relationships starting and old ones ceasing) going on all the while, and for exports in real terms as well.

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