Trade Credit and the Monetary Transmission Mechanism
The Bank of England Working Paper No. 115
22 Pages Posted: 25 Sep 2000
Date Written: 2000
This paper investigates whether firms with direct access to capital markets 'help out' firms who are reliant on credit from banks by extending more trade credit when times are hard. Taking up a theme of Meltzer (1960) it asks, whether there is a 'trade credit channel' that offsets the bank credit channel more familiar to monetary economists. Using a panel of UK firms quoted on the UK stock exchange, we find that there is. This might explain why, to date, evidence on the bank credit channel has been equivocal.
Keywords: trade credit, monetary transmission mechanism, credit channel
JEL Classification: G32, E52, L14
Suggested Citation: Suggested Citation