Citation

Discussion Paper Details

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Title: Trade Credit and the Transmission of Unconventional Monetary Policy

Author(s): Manuel Adelino, Miguel Ferreira, Mariassunta Giannetti and Pedro Pires

Publication Date: April 2020

Keyword(s): corporate bonds, employment, investment, monetary policy and trade credit

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

Abstract: We show that trade credit in production networks is important for the transmission of unconventional monetary policy. We find that firms with bonds eligible for purchase under the European Central Bank's Corporate Sector Purchase Program act as financial intermediaries and extend more trade credit to their customers. The increase in trade credit flows is more pronounced from core countries to periphery countries and towards financially constrained customers. Customers increase investment and employment in response to the additional financing, while suppliers with eligible bonds increase their customer base, potentially favoring upstream industry concentration. Our findings suggest that the trade credit channel of monetary policy produces heterogeneous effects on regions, industries, and firms.

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Bibliographic Reference

Adelino, M, Ferreira, M, Giannetti, M and Pires, P. 2020. 'Trade Credit and the Transmission of Unconventional Monetary Policy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14639