Trade Credit, Bank Lending and Monetary Policy Transmission

Simona Mateut, Spiros Bougheas and Paul Mizen

No ECO2003/02, Economics Working Papers from European University Institute

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 additional 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.

JEL-codes: E44 E52 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Trade credit, bank lending and monetary policy transmission (2006)
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2005)
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2003)
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