Monetary Policy, Implicit Interest Rate, and Relative Net Trade Credit

41 Pages Posted: 11 Aug 2013

See all articles by Santiago Carbo-Valverde

Santiago Carbo-Valverde

Bangor Business School; Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF)

José Manuel Mansilla-Fernandez

Public University of Navarre

Francisco Rodriguez Fernandez

University of Granada

Date Written: August 11, 2013

Abstract

This paper investigates the effects of monetary policy on the implicit interest rate of trade credit as well as the probability the firm becomes net trade borrower. We also construct the implicit interest rate as the difference between creditors and debtors over the sum of both. Our results show that a tightening in monetary policy leads to: (i) increase interest rate of trade credit, (ii) become firms in trade borrowers, (iii) generate divergence in the cost of trade credit among firms of the same industry sector, and (iv) create a complementarity effect in prices between trade and bank financing.

Keywords: implicit interest rate, monetary policy, relative net trade credit, trade credit

JEL Classification: E52, G32

Suggested Citation

Carbo-Valverde, Santiago and Mansilla-Fernandez, José Manuel and Fernandez, Francisco Rodriguez, Monetary Policy, Implicit Interest Rate, and Relative Net Trade Credit (August 11, 2013). Available at SSRN: https://ssrn.com/abstract=2308492 or http://dx.doi.org/10.2139/ssrn.2308492

Santiago Carbo-Valverde

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

José Manuel Mansilla-Fernandez (Contact Author)

Public University of Navarre ( email )

Business Administration Department
Campus Arrosadia
Pamplona, Pamplona 31006
Spain

HOME PAGE: http://sites.google.com/site/josemanuelmansillafernandezphd/home

Francisco Rodriguez Fernandez

University of Granada

C/Rector López Argueta S/N
Granada, Granada 18071
Spain

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