Does Trade Credit Substitute Bank Credit? Evidence From Firm-Level Data

Author/Editor:

Guido De Blasio

Publication Date:

August 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper examines micro data on Italian manufacturing firms' inventory behavior to test the Meltzer (1960) hypothesis according to which firms substitute trade credit for bank credit during periods of monetary tightening. It finds that their inventory investment is constrained by the availability of trade credit. As for the magnitude of the substitution effect, however, this study finds that it is not sizable. This is in line with the micro theories of trade credit and the evidence on actual firm practices, according to which credit terms display modest variations over time.

Series:

Working Paper No. 2003/166

Subject:

Bank credit Credit External debt Financial statements Monetary policy Monetary tightening Money Public financial management (PFM) Trade credits

English

Publication Date:

August 1, 2003

ISBN/ISSN:

9781451858129/1018-5941

Stock No:

WPIEA1662003

Pages:

28

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