This paper analyzes the role of bank credit in firms' export performance. We use Italian bank-firm matched data and contribute to the existing literature by focusing on the link between bank-credit and exports in ‘normal times’ (1997-2008) and measuring access to credit with hard data on the credit actually extended to firms by the banking system.
We also establish the causal link that goes from bank credit to exports, exploiting bank mergers and acquisitions as a source of bank credit supply shocks.
We find that short-run shocks to the supply of bank credit induce exporters to decrease their export flows, without affecting their domestic sales. On the other hand, non-exporters react by reducing their domestic sales.