Does Trade Credit Substitute Bank Credit? Evidence From Firm-Level Data

Guido de Blasio

No 2003/166, IMF Working Papers from International Monetary Fund

Abstract: The paper examines micro data on Italian manufacturing firms' inventory behavior to test the Meltzer (1960) hypothesis according to which firms substitute trade credit for bank credit during periods of monetary tightening. It finds that their inventory investment is constrained by the availability of trade credit. As for the magnitude of the substitution effect, however, this study finds that it is not sizable. This is in line with the micro theories of trade credit and the evidence on actual firm practices, according to which credit terms display modest variations over time.

Keywords: WP; TC-bank credit substitution hypothesis; TC variable; TC coefficient; underling TC determinant; TC constraint; Trade Credit; Monetary Policy; Manufacturing Firms; Bank credit; Credit; Financial statements; Monetary tightening; Trade credits (search for similar items in EconPapers)
Pages: 28
Date: 2003-08-01
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Citations: View citations in EconPapers (12)

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Journal Article: Does Trade Credit Substitute Bank Credit? Evidence from Firm‐level Data (2005)
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