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Business Conditions and Default Risks Across Countries

Author

Listed:
  • Michael Pflüger
  • Stephan Russek
Abstract
The risk of default that business firms face is very significant and differs widely across countries. This paper explores the links between countries’ business conditions and international trade embedment and the default risk at the country level from a theoretical point of view. Our main contribution is to set up a general equilibrium model which allows us to derive sharp predictions concerning how key factors which shape a country’s business and trade environment impact on the default risk of firms which operate in these environments. The predictions are in accord with readily available data.

Suggested Citation

  • Michael Pflüger & Stephan Russek, 2011. "Business Conditions and Default Risks Across Countries," Working Papers 098, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:098_pfluegerrussek
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    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/098_Business-Conditions-and-Default-Risks-Across-Countries.pdf
    File Function: First version, 2011
    Download Restriction: no
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    Citations

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    Cited by:

    1. Schröder, Philipp J.H. & Sørensen, Allan, 2012. "Firm exit, technological progress and trade," European Economic Review, Elsevier, vol. 56(3), pages 579-591.
    2. Pflüger, Michael P. & Russek, Stephan, 2011. "Heterogeneous Firms, Trade, and Economic Policy: Insights from a Simple Two-Sector Model," IZA Discussion Papers 6109, Institute of Labor Economics (IZA).
    3. Gabriel Felbermayr & Gilbert Spiegel, 2014. "A Simple Theory of Trade, Finance and Firm Dynamics," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 253-274, May.
    4. Ina Charlotte Jäkel, 2013. "Import-push or Export-pull? An Industry-level Analysis of the Impact of Trade on Firm Exit," Economics Working Papers 2013-20, Department of Economics and Business Economics, Aarhus University.
    5. Ina Jäkel, 2014. "Import-push or export-pull? An industry-level analysis of the impact of trade on firm exit," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 747-775, November.
    6. Wim Naudé, 2011. "Foreign Aid for Innovation: The Missing Ingredient in Private Sector Development?," Working Papers 2011/35, Maastricht School of Management.
    7. Benedikt Heid, 2014. "Essays on International Trade and Development," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 55.

    More about this item

    Keywords

    firm death; firm heterogeneity; business conditions and firm productivity; trade integration;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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