Research Seminar Series on Global Challenges – Fadi Hassan (Bank of Italy), 18th March 2021 at 12.15 p.m. (CET)

Global Challenges Seminar Series

Fadi Hassan (Bank of Italy) on “Trade Shocks and Credit Reallocation” (with Stefano Federico and Veronica Rappoport), jointly organised by the Centro Studi Luca d’Agliano, BAFFI CAREFIN and the Department of Economics, Management and Quantitative Methods (University of Milan) in collaboration with the Dipartimento di Economia, Metodi Quantitativi e Strategie di Impresa (Università Milano Bicocca) and the Dipartimento di Ingegneria Gestionale (Politecnico di Milano).
The webinar will be held on Thursday, 18th March 2021 at 12:15 p.m. (CET) via Zoom. Please register by email to


This paper shows that there are endogenous financial constraints arising from trade liberalization. Banks with a large share of loans on firms exposed to competition from China suffer an increase in non-performing loans and reduce their credit capacity. The drop in credit supply affects both firms directly exposed to import competition from China, and firms expected to expand upon trade liberalization, with economically relevant implications in terms of employment, investment, and output. This financial spillover between losers and winners from trade retards the reallocation of factors of production between firms and sectors, crucial to the welfare implication of trade liberalization.