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The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-Financial Firms in Turkey (Firma Ticari Borclari ve Kredi Aktarim Mekanizmasi: Turkiye Ornegi)

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  • Pinar Ozlu
  • Cihan Yalcin

Abstract

This study investigates the trade credit channel of monetary policy transmission in Turkey by using a large data set of corporate firms, which includes detailed information on balance sheets and income statements of firms regularly reported to the Central Bank of the Republic of Turkey (CBRT) in the period of 1996-2008. It suggests that the composition of external finance differs considerably across firm types based on size and export performance under tight and loose financial conditions. For both manufacturing and non-manufacturing firms, small and medium-sized firms (SMEs) and firms with low export share are financially constrained especially in tight periods. Findings suggest that those firms, which are financially constrained, tend to substitute trade credits for bank loans in tight periods. On the other hand, the evidence for large and export-oriented firms differs significantly across manufacturing and nonmanufacturing sectors such that manufacturing firms are more likely to have access to bank finance in tight periods compared to non-manufacturing firms. Large trade credits volume in firms’ balance sheets and its response to monetary stance imply that trade credit channel may mute the traditional credit channel of monetary transmission.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1016.

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Date of creation: 2010
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Handle: RePEc:tcb:wpaper:1016

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Keywords: Credit Channel; Trade Credits; Monetary Policy Transmission;

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References

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  1. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2005. "Trade credit and bank credit : evidence from recent financial crises," Policy Research Working Paper Series, The World Bank 3716, The World Bank.
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  3. Choi, Woon Gyu & Kim, Yungsan, 2005. "Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 40(04), pages 897-925, December.
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Cited by:
  1. Murat Duran & Gulserim Ozcan & Pinar Ozlu & Deren Unalmis, 2010. "Measuring the Impact of Monetary Policy on Asset Prices in Turkey (Turkiye’de Para Politikasinin Finansal Varlik Fiyatlari Uzerine Etkisi)," Working Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 1017, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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