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Trade Credit and the Transmission of Unconventional Monetary Policy

Author

Listed:
  • Manuel Adelino
  • Miguel A Ferreira
  • Mariassunta Giannetti
  • Pedro Pires

Abstract

We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.

Suggested Citation

  • Manuel Adelino & Miguel A Ferreira & Mariassunta Giannetti & Pedro Pires, 2023. "Trade Credit and the Transmission of Unconventional Monetary Policy," The Review of Financial Studies, Society for Financial Studies, vol. 36(2), pages 775-813.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:2:p:775-813.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac040
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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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