Many-to-one contagion of economic growth rate across trade credit network of firms
David S. Bree,
Marco Lamieri and
Papers from arXiv.org
We propose a novel approach and an empirical procedure to test direct contagion of growth rate in a trade credit network of firms. Our hypotheses are that the use of trade credit contributes to contagion (from many customers to a single supplier - "many to one" contagion) and amplification (through their interaction with the macrocopic variables, such as interest rate) of growth rate. In this paper we test the contagion hypothesis, measuring empirically the mesoscopic "many-to-one" effect. The effect of amplification has been dealt with in another paper. Our empirical analysis is based on the delayed payments between trading partners across many different industrial sectors, intermediated by a large Italian bank during the year 2007. The data is used to create a weighted and directed trade credit network. Assuming that the linkages are static, we look at the dynamics of the nodes/firms. On the ratio of the 2007 trade credit in Sales and Purchases items on the profit and loss statements, we estimate the trade credit in 2006 and 2008. Applying the "many to one" approach we compare such predicted growth of trade (demand) aggregated per supplier, and compare it with the real growth of Sales of the supplier. We analyze the correlation of these two growth rates over two yearly periods, 2007/2006 and 2008/2007, and in this way we test our contagion hypotheses. We could not find strong correlations between the predicted and the actual growth rates. We provide an evidence of contagion only in restricted sub-groups of our network, and not in the whole network. We do find a strong macroscopic effect of the crisis, indicated by a coincident negative drift in the growth of sales of nearly all the firms in our sample.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1506.01734 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1506.01734
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().