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Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh

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  • M. Shahe Emran
  • Dilip Mookherjee
  • Forhad Shilpi
  • M. Helal Uddin

Abstract

Traders are often blamed for high prices, prompting government regulation. We study the effects of a government ban of a layer of financing intermediaries in edible oil supply chain in Bangladesh during 2011–2012. Contrary to the predictions of a standard model of an oligopolistic supply chain, the ban caused downstream wholesale and retail prices to rise, and pass-through of the changes in imported crude oil price to fall. These results can be explained by an extension of the standard model to incorporate trade credit frictions, where intermediaries expand credit access of downstream traders.

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  • M. Shahe Emran & Dilip Mookherjee & Forhad Shilpi & M. Helal Uddin, 2021. "Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 202-236, July.
    • Handle: RePEc:aea:aejapp:v:13:y:2021:i:3:p:202-36
    DOI: 10.1257/app.20190083
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    2. Bensch, Gunther & Kaestner, Kathrin & Vance, Colin, 2023. "Pass-through of cocoa prices along the supply chain: What's left for farmers in Côte D'Ivoire?," Ruhr Economic Papers 1035, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Abdullah Al Mahmud & Muhammad Shahin Miah & Mohammad Rakib Uddin Bhuiyan, 2022. "Does Trade Credit Financing Affect Firm Performance? Evidence from an Emerging Market," IJFS, MDPI, vol. 10(4), pages 1-19, September.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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