The Geopolitics of Industrial Policy: Evidence from Export Credits - Adrien Matray

Speaker:  Adrien Matray, Federal Reserve Bank of Atlanta

Location: online or at Kiel Institute for the World Economy, Chausseestraße 111, 10115 Berlin

Organizers: Kiel Institute for the World Economy, CEPR

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Abstract: 

We examine the role of geopolitical competition in officially supported export credits, one of the most widely used tools of industrial policy. We construct several new datasets and provide the following evidence that geopolitical factors in export credit markets play an important role for understanding global financial and trade flows: (i) export credits account for over 60% of developing countries' external debt and often over half of their imports; (ii) geopolitical alignment is a strong predictor of export credit allocation, both unconditionally and in response to country risk shocks; (iii) quasi-random rotation into the UN Security Council, which temporarily increases countries' geopolitical importance, leads to an inflow of export credits from permanent members; (iv) in recent years, China has provided more export credits than all OECD countries combined; and (v) the importance of geopolitical factors in export credits among OECD economies has increased over time and is now comparable to that of geopolitical competitors, particularly China. aken together, our findings highlight how countries actively pursue their industrial policy in line with geopolitical goals.