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The Impact of Macroeconomic Uncertainty on Trade Credit for Non-Financial Firms


  • Christopher F. Baum

    () (Boston College
    DIW Berlin)

  • Mustafa Caglayan

    (University of Sheffield)

  • Neslihan Ozkan

    () (University of Bristol)


In this paper we hypothesize that greater macroeconomic uncertainty would cause firms to increasingly turn to their suppliers as a source of finance, making greater use of trade credit. We test this hypothesis using a panel of non-financial firms drawn from the annual COMPUSTAT database and show that an increase in macroeconomic uncertainty leads to a narrowing of the cross-sectional distribution of firms' trade credit-to-sales ratios.

Suggested Citation

  • Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2003. "The Impact of Macroeconomic Uncertainty on Trade Credit for Non-Financial Firms," Boston College Working Papers in Economics 566, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:566

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    References listed on IDEAS

    1. Nilsen, Jeffrey H, 2002. "Trade Credit and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 226-253, February.
    2. Baum, Christopher F. & Caglayan, Mustafa & Ozkan, Neslihan & Talavera, Oleksandr, 2006. "The impact of macroeconomic uncertainty on non-financial firms' demand for liquidity," Review of Financial Economics, Elsevier, vol. 15(4), pages 289-304.
    3. Paul Beaudry & Mustafa Caglayan & Fabio Schiantarelli, 2001. "Monetary Instability, the Predictability of Prices, and the Allocation of Investment: An Empirical Investigation Using U.K. Panel Data," American Economic Review, American Economic Association, vol. 91(3), pages 648-662, June.
    4. Adrian Pagan, 1986. "Two Stage and Related Estimators and Their Applications," Review of Economic Studies, Oxford University Press, vol. 53(4), pages 517-538.
    5. Schwartz, Robert A., 1974. "An Economic Model of Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(04), pages 643-657, September.
    6. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-872, September.
    7. Christopher F Baum & Sylvia Hristakeva, 2001. "DENTON: Stata module to interpolate a flow or stock series from low-frequency totals via proportional Denton method," Statistical Software Components S422501, Boston College Department of Economics, revised 17 Jul 2014.
    8. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    9. J. Stephen Ferris, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 243-270.
    10. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
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    Cited by:

    1. Bastos, Rafael & Pindado, Julio, 2013. "Trade credit during a financial crisis: A panel data analysis," Journal of Business Research, Elsevier, vol. 66(5), pages 614-620.

    More about this item


    trade credit; financing; liquidity constraints; uncertainty;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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