US monetary policy spillovers to emerging markets: The role of trade credit

Mélina London and Maéva Silvestrini

Journal of International Economics, 2025, vol. 155, issue C

Abstract: This paper provides empirical evidence on the impact of US monetary policy surprises on firm-to-firm trade credit in emerging markets, using a proprietary firm-level database. We show that trade credit acts as a buffer against the adverse effects of US monetary tightening, which, by constraining global financial conditions, increases reliance on trade credit as an alternative financing source. This effect is more pronounced for buyers with poor credit quality, who are primarily affected when financial conditions tighten. This later effect only exists in pre-existing relationships, where trust can be more readily established, compared to new partnerships. Given the widespread use of trade credit in emerging markets, this buffering role is crucial for mitigating financial pressures in these economies.

Keywords: US monetary policy; Spillovers; Trade credit; Emerging markets; Capital flows (search for similar items in EconPapers)
JEL-codes: E52 F14 F40 F44 L14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:155:y:2025:i:c:s0022199625000200

DOI: 10.1016/j.jinteco.2025.104064

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