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Does trade credit redistribution thwart monetary policy? Evidence from Italy

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  • Giuseppe Marotta

Abstract

Italy is an ideal candidate for testing the credit view of the transmission mechanism because of a bank-centred financial structure, a sizeable trade debt, and an economy titled towards small firms. An empirical analysis of trade credit and debt on averaged panel data shows that small firms act as financially constrained and cycle-sensitive, whereas large ones aim at smoothing sales, adopt an integrated management of inventories and receivables and have a higher trade debt to purchases elasticity. On balance, the net trade credit channel does not, as implied by the credit view, shield small firms from a monetary squeeze.

Suggested Citation

  • Giuseppe Marotta, 1997. "Does trade credit redistribution thwart monetary policy? Evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1619-1629.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:12:p:1619-1629
    DOI: 10.1080/00036849700000038
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    References listed on IDEAS

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    1. Stephen D. Oliner & Glenn D. Rudebusch, 1995. "Is there a bank lending channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 1-20.
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    5. Gregory E. Elliehausen & John D. Wolken, 1993. "The demand for trade credit: an investigation of motives for trade credit use by small businesses," Staff Studies 165, Board of Governors of the Federal Reserve System (U.S.).
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    7. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-1141, December.
    8. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
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