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Review of Financial Studies Vol. 36 No. 2 2023

Trade Credit and the Transmission of Unconventional Monetary Policy

Manuel Adelino1; Miguel A. Ferreira2; Mariassunta Giannetti3; Pedro Pires4

1 Duke University , CEPR, and NBER, USA · 2 Nova School of Business and Economics , CEPR, and ECGI, Portugal · 3 Stockholm School of Economics , CEPR, and ECGI, Sweden · 4 Nova School of Business and Economics , Portugal

Abstract

We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.

DOI
10.1093/rfs/hhac040
Volume
36
Issue
2
Pages
775-813
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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