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Trade credit, sovereign risk and monetary policy in Europe

Author

Listed:
  • Cantero Sáiz, María
  • Sanfilippo Azofra, Sergio
  • Torre Olmo, Begoña
  • López Gutiérrez, Carlos

Abstract

The purpose of this article is to analyze how sovereign risk influences the use of trade credit, both directly and through monetary policy. In addition, we test whether these effects differ during the crisis as compared to before the crisis. Using a sample of 45,864 Eurozone firms (2005–2012), we find that trade credit received increases when sovereign risk becomes higher, but only before the crisis. However, during the crisis, trade credit supply decreases as sovereign risk increases. Additionally, monetary restrictions only lead to an increase in trade credit in low or moderate sovereign risk countries.

Suggested Citation

  • Cantero Sáiz, María & Sanfilippo Azofra, Sergio & Torre Olmo, Begoña & López Gutiérrez, Carlos, 2017. "Trade credit, sovereign risk and monetary policy in Europe," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 39-54.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:39-54
    DOI: 10.1016/j.iref.2017.09.010
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    Citations

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    Cited by:

    1. Peng, Xuan & Wang, XiongYuan & Yan, Lina, 2019. "How does customer concentration affect informal financing?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 152-162.
    2. Henry Thompson, 2021. "An income determination model for Greece in the Euro Zone," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 664-673, December.
    3. Shikimi, Masayo & Yamada, Kazuo, 2019. "Trade and financial channels as the transmission mechanism of the financial crisis," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 364-381.
    4. Mai Dao & Trung Pham & Hongkang Xu, 2022. "Internal control effectiveness and trade credit," Review of Quantitative Finance and Accounting, Springer, vol. 59(4), pages 1423-1452, November.
    5. Xia, Changyuan & Zhang, Xiaowei & Cao, Chunfang & Xu, Nan, 2019. "Independent director connectedness in China: An examination of the trade credit financing hypothesis," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 209-225.

    More about this item

    Keywords

    Trade credit; Sovereign risk; Monetary policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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