Trade Credit and the Effect of Macro-Financial Shocks: Evidence From U.S. Panel Data

Yungsan Kim and Woon Gyu Choi

No 2003/127, IMF Working Papers from International Monetary Fund

Abstract: Many studies examine why firms are financed by their suppliers, but few empirical studies look at the macroeconomic implications of such financial arrangements. Using disaggregated panel data, we examine how firms extend and use trade credit. We find that, controlling for the transactions or asset management motive, both accounts payable and receivable increase with tighter policy, implying that trade credit helps firms absorb the effect of a credit contraction. A comparison of S&P 500 firms with smaller firms, however, provides no evidence that when policy is tightened, large firms play the role of credit suppliers more actively than small firms.

Keywords: WP; accounts payable; S&P firm; retained earnings; monetary policy; Trade Credit; Accounts Receivable; Credit Channel; Panel Data; AR-asset ratio; smaller firm; short-term debt; high-quality firm; ratchet effect; firm level; Trade credits; Monetary tightening; Bank credit; Government asset management; Asset management; E. net trade credit use regression; C. accounts receivable regression; Policy shock; panel datum; view of trade credit; Wages (search for similar items in EconPapers)
Pages: 34
Date: 2003-06-01
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Citations: View citations in EconPapers (5)

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Journal Article: Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data (2005)
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