Trade Credit and Exchange Rate Risk Pass Through

Bryan Hardy, Felipe Saffie and Ina Simonovska

No 31078, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Large firms borrow in foreign currency and are net providers of trade credit to firms in their supply chains. We model the transmission of exchange rate risk via firm balance sheets along the supply chain. Trade credit loosens borrowing constraints and allows for higher production. Furthermore, firms are more likely to pass-through exchange rate shocks to their balance sheets onto their partners the more they are financially constrained. We validate these predictions using a quarterly firm panel for 19 emerging markets. Trade credit constitutes an important transmission mechanism of exchange rate shocks, but firms tend to protect their trading partners.

JEL-codes: E30 F2 F3 F4 G15 G3 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-des, nep-fdg, nep-int, nep-mac, nep-mon and nep-opm
Note: CF EFG IFM ITI
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w31078.pdf (application/pdf)

Related works:
Working Paper: Trade credit and exchange rate risk pass through (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31078

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31078

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).