Do export credit agencies stimulate export in developing countries? Insights from EXIM bank of India

Employing annual time series data, this research paper examines the effectiveness of export credit agencies (ECA) in stimulating export within the framework of export supply theory. We employ autoregressive distributed lag (ARDL) models to study long run equilibrium between the variables and short run response of exports to changes in export supply factors. The empirical findings support the promotional effects of ECAs for exports from India, along with evidences for the significant role of relative prices and domestic production capacity in achieving higher export. Additionally, the findings indicate long term association of short- and long-term credit with exports from India. However, only long-term credit has a short run association with export supply. On a more granular level, the sectoral findings show negatively significant association between export credit and export supply. We recommend to expand export credit but review financing for sectors with negative or insignificant associations.