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Does Trade Credit Substitute Bank Credit? Evidence from Firm-level Data

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Author Info
Guido De Blasio
Abstract

The paper examines micro data on Italian manufacturing firms' inventory behavior to test the Meltzer (1960) hypothesis according to which firms substitute trade credit for bank credit during periods of monetary tightening. It finds that their inventory investment is constrained by the availability of trade credit. As for the magnitude of the substitution effect, however, this study finds that it is not sizable. This is in line with the micro theories of trade credit and the evidence on actual firm practices, according to which credit terms display modest variations over time.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/166.

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Length: 27 pages
Date of creation: 02 Sep 2003
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Handle: RePEc:imf:imfwpa:03/166

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Keywords: Trade ; Credit ; Monetary policy ; Manufacturing ;

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    Other versions:
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  21. Blinder, Alan S & Maccini, Louis J, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter. [Downloadable!] (restricted)
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  28. Benoît Mulkay ; Bronwyn H, Hall ; Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Centre de Recherche en Economie et Statistique. [Downloadable!]
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