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Trade Credit, Bank Lending and Monetary Policy Transmission

Simona Mateut (), Spiros Bougheas () and Paul Mizen ()

No 149, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: This paper investigates the role of trade credit in the transmission of monetary policy. Most models of the transmission mechanism allow the firm to access only financial markets or bank lending according to some net worth criterion. In our model we introduce trade credit as an dditional source of funding. We predict that when monetary policy tightens there will be a reduction in market and bank lending, and an increase in trade credit. This is confirmed with an empirical investigation of 16,000 manufacturing firms.

Keywords: trade credit; bank lending; monetary policy transmission; credit channel (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2003-06-04
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Related works:
Journal Article: Trade credit, bank lending and monetary policy transmission (2006) Downloads
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2005)
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2003) Downloads
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