Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh

Dilip Mookherjee, M. Shahe Emran, Forhad Shilpi and Helal Uddin

No 14272, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We extend standard models of price pass-through in an imperfectly competitive supply chain to incorporate rationing of trade credit. Credit rationing reverses predictions concerning effects of raw material import prices on pass-through to wholesale prices, and effects of regulations of intermediaries. To test these we study the effects of a policy in Bangladesh's edible oils supply chain during 2011-12 banning a layer of financing intermediaries. Evidence from a difference-in-difference estimation rejects the standard model. We find that the regulatory effort to reduce market power of financing intermediaries ended up raising consumer prices by restricting access to credit of downstream traders.

Keywords: Intermediary; Supply chain; market power; Credit rationing; Pass-through; Edible oils; Bangladesh (search for similar items in EconPapers)
JEL-codes: L13 O12 Q13 (search for similar items in EconPapers)
Date: 2020-01
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Related works:
Journal Article: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2021)
Working Paper: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2020)
Working Paper: Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh (2017)
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