Working Paper: CEPR ID: DP14639
Authors: Manuel Adelino; Miguel Ferreira; Mariassunta Giannetti; Pedro Pires
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.
Keywords: monetary policy; trade credit; corporate bonds; investment; employment
JEL Codes: E50; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CSPP (C87) | increase in trade credit (F19) |
| eligible firms (L20) | increase in accounts receivable as a proportion of sales (M41) |
| customer financial constraints (D10) | increase in trade credit (F19) |
| customers of eligible firms (L84) | increase in accounts payable (M41) |
| CSPP (C87) | heterogeneous effects across regions (C21) |
| CSPP (C87) | benefits for periphery countries (F55) |