IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/114364.html
   My bibliography  Save this paper

Economic System Entanglement on Intra-Firm Trade Portfolios: The Impact of Counterparty Credit Ratings on Business-to-Business Credit Dynamics

Author

Listed:
  • Desogus, Marco
  • Casu, Elisa

Abstract

In the last five years, Italy has seen a noticeable and steady increase in the supply of trade credit, granting of extensions, and general systemic business-to-business financial support. Focusing on system entanglement, this paper examines the impact in Italy of bank valuations of creditworthiness and credit intermediation on intra-firm trade portfolio dynamics. We further consider the impacts of exogenous shocks to the economy and other disruptive events on payment regularity and risks of insolvency in intra-firm transactions. Mapping portfolio dynamics to a quantum super-system with a Hamiltonian space of phases, we demonstrate that the performance of intra-firm portfolios depends concurrently on bank valuations and that system entanglement allows us to examine the extent to which economic disruptions shift portfolio dynamics from their state of equilibrium.

Suggested Citation

  • Desogus, Marco & Casu, Elisa, 2021. "Economic System Entanglement on Intra-Firm Trade Portfolios: The Impact of Counterparty Credit Ratings on Business-to-Business Credit Dynamics," MPRA Paper 114364, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114364
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/114364/1/MPRA_paper_114364.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Giannetti, Caterina, 2019. "Debt specialization and performance of European firms," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 257-271.
    2. Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 2003. "Backward-looking interest-rate rules, interest-rate smoothing, and macroeconomic instability," Proceedings, Federal Reserve Bank of Cleveland, pages 1379-1423.
    3. Desogus, Marco & Venturi, Beatrice, 2019. "Bank Crashes and Micro Enterprise Loans," MPRA Paper 114469, University Library of Munich, Germany.
    4. Desogus, Marco & Casu, Elisa, 2020. "What Are the Impacts of Credit Crunch on the Bank-Enterprise System? An Analysis Through Dynamic Modeling and an Italian Dataset," MPRA Paper 114349, University Library of Munich, Germany.
    5. Tor Jacobson & Erik Schedvin, 2015. "Trade Credit and the Propagation of Corporate Failure: An Empirical Analysis," Econometrica, Econometric Society, vol. 83(4), pages 1315-1371, July.
    6. Jelena Zivanovic, 2019. "Corporate Debt Composition and Business Cycles," Staff Working Papers 19-5, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Desogus & Beatrice Venturi, 2023. "Stability and Bifurcations in Banks and Small Enterprises—A Three-Dimensional Continuous-Time Dynamical System," JRFM, MDPI, vol. 16(3), pages 1-20, March.
    2. Peydró, José-Luis & Jiménez, Gabriel & Kenan, Huremovic & Moral-Benito, Enrique & Vega-Redondo, Fernando, 2020. "Production and financial networks in interplay: Crisis evidence from supplier-customer and credit registers," CEPR Discussion Papers 15277, C.E.P.R. Discussion Papers.
    3. Brito Paulo & Marini Giancarlo & Piergallini Alessandro, 2016. "House prices and monetary policy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(3), pages 251-277, June.
    4. Altinoglu, Levent, 2021. "The origins of aggregate fluctuations in a credit network economy," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 316-334.
    5. d'Albis, Hippolyte & Augeraud-Véron, Emmanuelle & Hupkes, Hermen Jan, 2014. "Bounded interest rate feedback rules in continuous-time," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 227-236.
    6. Tommy Sveen & Lutz Weinke, 2004. "Firm-Specific Investment, Sticky Prices, and the Taylor Principle," Working Paper 2004/12, Norges Bank.
    7. Jelena Zivanovic, 2021. "An Optimal Macroprudential Policy Mix for Segmented Credit Markets," Staff Working Papers 21-31, Bank of Canada.
    8. Banu Demir & Beata Javorcik & Tomasz K. Michalski & Evren Ors, 2020. "Financial Constraints and propagation of shocks in production network," Discussion Papers 2020-23, University of Nottingham, GEP.
    9. Alfaro, Laura & García-Santana, Manuel & Moral-Benito, Enrique, 2021. "On the direct and indirect real effects of credit supply shocks," Journal of Financial Economics, Elsevier, vol. 139(3), pages 895-921.
    10. Marco Airaudo, 2017. "Complex stock price dynamics under Max Weber’s spirit of capitalism hypothesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 47-73, June.
    11. Qian, Qian & Chao, Xiangrui & Feng, Hairong, 2023. "Internal or external control? How to respond to credit risk contagion in complex enterprises network," International Review of Financial Analysis, Elsevier, vol. 87(C).
    12. Maurizio Conti & Leandro Elia & Antonella Rita Ferrara & Massimiliano Ferraresi, 2020. "Government late payments and firms survival. Evidence from the EU," Working papers 87, Società Italiana di Economia Pubblica.
    13. Alvaro Garcia-Marin & Santiago Justel & Tim Schmidt-Eisenlohr, 2019. "Trade Credit, Markups, and Relationships," CESifo Working Paper Series 7600, CESifo.
    14. Qian Qian & Yang Yang & Zong-Fang Zhou, 2019. "Research on Trade Credit Spreading and Credit Risk within the Supply Chain," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 389-411, January.
    15. 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.
    16. Bittner, Christian & Fecht, Falko & Georg, Co-Pierre, 2021. "Contagious zombies," Discussion Papers 15/2021, Deutsche Bundesbank.
    17. Costello, Anna M., 2019. "The value of collateral in trade finance," Journal of Financial Economics, Elsevier, vol. 134(1), pages 70-90.
    18. Desogus, Marco & Casu, Elisa, 2020. "What Are the Impacts of Credit Crunch on the Bank-Enterprise System? An Analysis Through Dynamic Modeling and an Italian Dataset," MPRA Paper 114349, University Library of Munich, Germany.
    19. Lengnick, Matthias & Wohltmann, Hans-Werner, 2016. "Optimal monetary policy in a new Keynesian model with animal spirits and financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 64(C), pages 148-165.
    20. Benhabib, Jess & Eusepi, Stefano, 2005. "The design of monetary and fiscal policy: A global perspective," Journal of Economic Theory, Elsevier, vol. 123(1), pages 40-73, July.

    More about this item

    Keywords

    system entanglement; intra-firm trade; portfolio dynamics; credit valuation;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:114364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.