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Trade credit and the monetary transmission mechanism

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  • Marion Kohler
  • Erik Britton
  • Tony Yates

Abstract

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. In other words, is there 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 it is found that there is. This might explain why, to date, evidence on the bank credit channel has been equivocal.

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File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2000/wp115.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 115.

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Date of creation: Jun 2000
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Handle: RePEc:boe:boeewp:115

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  17. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  18. Laffer, Arthur B, 1970. "Trade Credit and the Money Market," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 239-67, March-Apr.
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