Inter‐Firm Trade Finance in Times of Crisis
AbstractThe paper discusses the main features that distinguish inter-firm international trade finance from alternative sources of financing. On the one hand, inter-firm trade finance could help overcome informational problems associated with other lending relationships; on the other, it may contribute to propagate shocks due to the interconnection among firms along credit chains. The paper evaluates the potential effects of a financial crisis on the use of trade credit for firms operating in developing countries. It argues that while the advantages of trade credit might remain largely unexploited due to poor legal institutions, the disadvantages might be exacerbated because of these firmsâ greater exposure to a default chain. Based on these arguments, a menu of choices is identified for what policymakers can do to boost firmsâ access to inter-firm trade finance in times of crisis.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 34 (2011)
Issue (Month): 10 (October)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920
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- Escaith, Hubert, 2009. "Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession (revised)," MPRA Paper 31864, University Library of Munich, Germany, revised Jun 2011.
- Independent Evaluation Group, 2013. "Evaluation of the International Finance Corporation's Global Trade Finance Program, 2006-12," World Bank Publications, The World Bank, number 15769, March.
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