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Trade Credit, Bank Lending and Monetary Policy Transmission

Simona Mateut, Spiros Bougheas and Paul Mizen

Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper investigates the role of trade credit in the transmission of monetary policy. Most models of the transmission mechanism allow firms to access only financial markets or bank lending according to some net worth criterion. In our model we consider external finance from trade credit as an additional source of funding for firms that cannot obtain credit from banks. We predict that when monetary policy tightens there will be a reduction in bank lending relative to trade credit. This is confirmed with an empirical investigation of 16,000 UK manufacturing firms.

Keywords: Trade credit; Bank lending; Monetary policy transmission; Credit channel (search for similar items in EconPapers)
Date: 2005-01
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Citations: View citations in EconPapers (11)

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Journal Article: Trade credit, bank lending and monetary policy transmission (2006) Downloads
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2003) Downloads
Working Paper: Trade Credit, Bank Lending and Monetary Policy Transmission (2003) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:05/01

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