 The adoption and termination of suppliers over the business cycleLe Xu, Yang Yu and Francesco Zanetti Journal of Monetary Economics, 2025, vol. 151, issue C Abstract: We assemble a firm-level dataset to study the adoption and termination of suppliers over business cycles. We document that the aggregate number and rate of adoption of suppliers are procyclical. The rate of termination is acyclical at the aggregate level, and the cyclicality of termination encompasses large differences across producers. To account for these new facts, we develop a model with optimizing producers that incur separate costs for management, adoption, and termination of suppliers. These costs alter the incentives to scale up production and to replace existing with new suppliers. Sufficiently high convexity in management relative to adjustment costs is crucial to replicating the observed cyclicality in the adoption and termination rates at the producer and aggregate levels. We study the welfare implications of credit injections and subsidies on new inputs—the two main classes of supply-chain policies adopted in the U.S. since the COVID-19 pandemic. Credit injections generally outperform subsidies on new inputs, except when aggregate TFP is exceptionally high. Keywords: Management and adjustment costs; Adoption and termination of suppliers; Business cycles (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:151:y:2025:i:c:s0304393225000017 DOI: 10.1016/j.jmoneco.2025.103730 Access Statistics for this article Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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