![Page 1: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/1.jpg)
Comments on Tang and Wu’sTrade Credit Bank Credit and
Financial Crises:The Case of Taiwan
Andrew K. RoseUC Berkeley, CEPR and NBER
![Page 2: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/2.jpg)
Part of an Ongoing Debate
• Massive trade collapse in Great Recession– Severe, sudden, synchronized (sectors, countries)– Bigger collapse than GDP• Bigger than Great Depression (Eichengreen and
O’Rourke)
– Why?
2
![Page 3: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/3.jpg)
Potential Explanations
1. Demand for manufacturing goods collapsed– Especially durables• Alternatively inventories
2. Issues with supply chains– Perhaps a new normal?
3. (Artificial) Trade Frictions rose– Traditional Protectionism• Evenett, Global Trade Alert
– Alternatively: trade credit
3
![Page 4: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/4.jpg)
Work on Trade Creditand Great Recession
• Much Evidence finds role for credit constraints reducing trade– Manova: credit constraints affect exports– Amiti and Weinstein: Japanese exporters most
affected use banks most affected– Feenstra et al: more evidence on exports
4
![Page 5: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/5.jpg)
Still, Much Dispute
• Most find small role for trade credit in collapse
• Alternative explanations work better– Alessandra et al– Levchenko et al– Eaton et al
5
![Page 6: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/6.jpg)
Tang & Wu Contribute to Debate
• Innovations include:1. Better data (firm-level panel)2. Compare trade and bank credit• Substitutes or Complements?• A: Varies with recession
– Complements in 2001; substitutes in 2008-09
3. Compare recessions• 2001 dot-com vs. 2008-09 Great Recession
6
![Page 7: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/7.jpg)
Lots of Strengths
• Great Motivation• Terrific Literature Review• Careful data work
7
![Page 8: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/8.jpg)
Things I would do differently
1. Worry about Timing2. Add Crisis3. More Sensitivity Analysis4. Miscellaneous Gripes
8
![Page 9: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/9.jpg)
1: Timing Issues
• Choice of 2008Q4 (not 2008Q3) seems critical, arbitrary, unwarranted
• When did the recession begin?
9
![Page 10: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/10.jpg)
Taiwan Recession Began 2008Q3
10
![Page 11: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/11.jpg)
Bumps in 2008Q4(Little variation otherwise and …
big excess supply of trade credit throughout)
11
![Page 12: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/12.jpg)
Need to Choose Dates Carefully?
• Do we Have to Choose Crisis Dates at all?• Instead: add comprehensive set of time
effects, focus on those coefficients
12
![Page 13: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/13.jpg)
2: Add Asian Financial Crisis
• 2001, 2008—09 recessions relevant for Taiwan
• But Asian financial crisis of 1997-98?– (Taiwan mildly affected)– Sample of firms here starts in 1995!– Can add third (regional) crisis at cost of some
firms
13
![Page 14: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/14.jpg)
3: Sensitivity Analysis
• If stick with current methodology, show insensitivity with respect to exact dates
• Alternative: use event-study on crises
14
![Page 15: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/15.jpg)
4: Miscellaneous Gripes
1. Simultaneity: aren’t bank credit and trade credit potentially driven by same phenomena?
2. How important are these firms in Taiwanese manufacturing? GDP?
3. Selection bias important? Only firms listed throughout; no entry/exit
4. Interpolation makes me nervous; so does removing extreme values (especially in crisis!)
5. Way too many digits/coefficients in tables
15
![Page 16: Comments on Tang and Wus Trade Credit Bank Credit and Financial Crises: The Case of Taiwan Andrew K. Rose UC Berkeley, CEPR and NBER](https://reader036.vdocument.in/reader036/viewer/2022062511/5517f0e555034693228b45a6/html5/thumbnails/16.jpg)
Generalizability
• Key Finding: 2001 and Great Recessions differ– Completely Plausible– But what about Future Recessions?– Idiosyncrasies reduce policy implications
• Is Taiwan special/unusual?
16