Trade credit and global value chains

Ngoc Thang Doan () and Huong Giang Mai ()
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Ngoc Thang Doan: Banking Academy of Vietnam
Huong Giang Mai: Banking Academy of Vietnam

International Economics and Economic Policy, 2025, vol. 22, issue 2, No 2, 32 pages

Abstract: Abstract This research paper investigates the impact of trade credit (TC) on the engagement of countries in global value chains (GVCs) using a dataset of 103,231 country-pair observations spanning 75 countries from 1996 to 2020. GVC participation is measured by value-added components in exports, drawn from the OECD TiVA 2023 database, while TC is proxied using trade credit and advances data from the IMF Balance of Payments (BOP) accounts. A revised version of the standard gravity model is employed to analyze how TC extended by trading partners facilitates deeper integration into GVCs. Our rigorous analysis, supported by a series of robustness tests, reveals that TC positively influences both backward and forward participation in GVCs. These effects are primarily mediated through mechanisms such as cost reductions and the alleviation of information asymmetry. The findings highlight the critical role of financial mechanisms like trade credit in enhancing global trade relationships and economic integration.

Keywords: Trade credit; Global value chain; International trade; Gravity mode (search for similar items in EconPapers)
JEL-codes: F1 F2 F6 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10368-025-00653-z

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