Does Trade Credit Substitute for Bank Credit? Evidence from Firm-Level Data

28 Pages Posted: 2 Feb 2006

Date Written: August 2003

Abstract

The paper examines micro data on Italian manufacturing firms` inventory behavior to test the Meltzer (1960) hypothesis according to which firms substitute trade credit for bank credit during periods of monetary tightening. It finds that their inventory investment is constrained by the availability of trade credit. As for the magnitude of the substitution effect, however, this study finds that it is not sizable. This is in line with the micro theories of trade credit and the evidence on actual firm practices, according to which credit terms display modest variations over time.

Keywords: Trade Credit Monetary Policy Manufacturing Firms

JEL Classification: E51 E52 E65

Suggested Citation

de Blasio, Guido, Does Trade Credit Substitute for Bank Credit? Evidence from Firm-Level Data (August 2003). IMF Working Paper No. 03/166, Available at SSRN: https://ssrn.com/abstract=880196

Guido De Blasio (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
199
Abstract Views
946
Rank
276,074
PlumX Metrics