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Trade Credit And The Effect Of Macro Financial Shocks
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Book Synopsis Trade Credit and the Effect of Macro-Financial Shocks by : Mr.Yungsan Kim
Download or read book Trade Credit and the Effect of Macro-Financial Shocks written by Mr.Yungsan Kim and published by International Monetary Fund. This book was released on 2003-06-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many studies examine why firms are financed by their suppliers, but few empirical studies look at the macroeconomic implications of such financial arrangements. Using disaggregated panel data, we examine how firms extend and use trade credit. We find that, controlling for the transactions or asset management motive, both accounts payable and receivable increase with tighter policy, implying that trade credit helps firms absorb the effect of a credit contraction. A comparison of S&P 500 firms with smaller firms, however, provides no evidence that when policy is tightened, large firms play the role of credit suppliers more actively than small firms.
Book Synopsis Trade Credit and and the Effect of Macro-financial Shocks by : Woon Gyu Choi
Download or read book Trade Credit and and the Effect of Macro-financial Shocks written by Woon Gyu Choi and published by . This book was released on 2003 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Trade Credit and Bank Credit by : Inessa Love
Download or read book Trade Credit and Bank Credit written by Inessa Love and published by World Bank Publications. This book was released on 2005 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The authors study the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. They find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. The authors observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. The results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed by way of trade credit by the firms with stronger financial position to the firms with weaker financial stand "--World Bank web site.
Book Synopsis Trade Finance during the Great Trade Collapse by : Jean-Pierre Chauffour
Download or read book Trade Finance during the Great Trade Collapse written by Jean-Pierre Chauffour and published by World Bank Publications. This book was released on 2011-06-22 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: On September 15, 2008, Lehman Brothers, the fourth largest U.S. investment bank filed for bankruptcy. Global credit markets tightened. Spreads skyrocketed. International trade plummeted by double digits. Banks were reportedly unable to meet the demand from their customers to finance their international trade operations, leaving a trade finance 'gap' estimated at around US$25 billion. Governments and international institutions felt compelled to intervene based on the information that some 80-90 percent of world trade relies on some form of trade finance. As the recovery unfolds, the time has come to provide policy makers and analysts with a comprehensive assessment of the role of trade finance in the 2008-09 great trade collapse and the subsequent role of governments and institutions to help restore trade finance markets. After reviewing the underpinning of trade finance and interfirm trade credit, 'Trade Finance during the Great Trade Collapse' aims to answer the following questions: - Was the availability and cost of trade finance a major constraint on trade during the 2008-09 global economic crisis? - What are the underpinnings and limits of national and international public interventions in support of trade finance markets in times of crisis? - How effective were the public and private sector mechanisms put in place during the crisis to support trade and trade finance? - To what extent have the new banking regulations under Basel II and Basel III exacerbated the trade finance shortfall during the crisis and in the post-crisis environment, respectively? 'Trade Finance during the Great Trade Collapse' is the product of a fruitful collaboration during the crisis among the World Bank Group, international financial partners, private banks, and academia. 'Trade is the lifeblood of the world economy, and the sharp collapse in trade volumes was one of the most dramatic consequences of the global financial crisis. It was the moment the financial crisis hit the real economy, and when parts of the world far from the epicenter of financial turbulence felt its full fury. This book is extremely timely and full of critical insights into the role of trade finance and the potential damaging impact from the unintended consequences of regulatory changes.' --Peter Sands, CEO, Standard Chartered Bank
Book Synopsis The Macroeconomics of Trade Credit by : Luigi Bocola
Download or read book The Macroeconomics of Trade Credit written by Luigi Bocola and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In most countries, suppliers of intermediate goods and services are also the main providers of short-term financing to firms. This paper studies the macroeconomic implications of these financial links. In our model, trade credit is the outcome of a long-term contract between firms linked in the production process, and it is sustained in equilibrium by reputation forces as customers lose the relationship with their suppliers in case of a default. These financial links give rise to a credit multiplier: suppliers can enforce repayment of these IOUs, and they can discount these bills with banks to obtain liquidity. This process can either dampen or amplify the output effects of financial shocks, depending on the borrowing capacity of suppliers. Using Italian data, we find that the credit multiplier is sizable and show that trade credit amplified the output costs of the Great Recession by 45%.
Book Synopsis Trade Credit and Bank Credit by : Inessa Love
Download or read book Trade Credit and Bank Credit written by Inessa Love and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors study the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. They find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. The authors observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. The results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed by way of trade credit by the firms with stronger financial position to the firms with weaker financial stand.
Book Synopsis The Macroeconomic Relevance of Credit Flows by : Alexander Herman
Download or read book The Macroeconomic Relevance of Credit Flows written by Alexander Herman and published by International Monetary Fund. This book was released on 2015-06-30 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper exploits the Financial Accounts of the United States to derive long time series of bank and nonbank credit to different sectors, and to examine the cyclical behavior of these series in relation to (i) the long-term business cycle, (ii) recessions and recoveries, and (iii) systemic financial crises. We find that bank and nonbank credit exhibit different dynamics throughout the business cycle. This diverging cyclical behavior of output and bank and nonbank credit argues for placing greater emphasis on sector-specific macroprudential measures to contain risks to the financial system, rather than using interest rates to address any vulnerabilities. Finally, we examine the role of bank and nonbank credit in the creation of financial interconnections and illustrate a method to conduct macro-financial stability assessments.
Book Synopsis Credit Matters by : Tamim A. Bayoumi
Download or read book Credit Matters written by Tamim A. Bayoumi and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a framework for analyzing macro-financial linkages in the United States. We estimate the effects of a negative shock to banks' capital/asset ratio on lending standards, which in turn affect consumer credit, mortgages, and corporate loans, and the corresponding components of private spending (consumption, residential investment and business investment). In addition, our empirical model allows for feedback from spending and income to bank capital adequacy and credit. Hence, we trace the full credit cycle. An exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1 1/2 percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects.
Book Synopsis The Source of Fluctuations in Money by : Valerie Ann Ramey
Download or read book The Source of Fluctuations in Money written by Valerie Ann Ramey and published by . This book was released on 1991 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests the importance of technology shocks versus financial shocks for explaining, fluctuations in money. The model presented extends the theory of King and Plosser by recognizing that both money and trade credit provide transactions services. The model shows that the comovements between money and trade credit can reveal the nature of the underlying shocks. The empirical results strongly suggest that shocks to the financial system account for most of the fluctuations in money. Thus, the results cast doubt on the hypothesis that nonfinancial technology shocks are the main source of the money-income correlation.
Book Synopsis Testing the Trade Credit and Trade Link by : Marc Auboin
Download or read book Testing the Trade Credit and Trade Link written by Marc Auboin and published by . This book was released on 2012 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Trade finance has received special attention during the financial crisis as one of the potential culprits for the great trade collapse. Several researchers have used micro level data to establish the link between trade finance and trade, especially so during the financial crisis, and have found diverting results. This paper analyses the effect of trade credit on trade on a macro level through a whole cycle. We employ Berne Union data on export credit insurance, the most extensive dataset on trade credits available at the moment, for the period of 2005-2011. Using an instrumentation strategy we can identify a significantly positive effect of insured trade credit, as a proxy for trade credits, on trade. The effect of insured trade credit on trade is very strong and remains stable over the cycle, not varying between crisis and non-crisis periods. -- trade credit ; financial crisis ; import estimation.
Book Synopsis Trade Credit and the Effect of Macro-financial Shocks by : Woon Gyu Choi
Download or read book Trade Credit and the Effect of Macro-financial Shocks written by Woon Gyu Choi and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Supply and Productivity Growth by : Francesco Manaresi
Download or read book Credit Supply and Productivity Growth written by Francesco Manaresi and published by International Monetary Fund. This book was released on 2019-05-17 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.
Book Synopsis Aggregate Uncertainty and the Supply of Credit by : Mr.Fabian Valencia
Download or read book Aggregate Uncertainty and the Supply of Credit written by Mr.Fabian Valencia and published by International Monetary Fund. This book was released on 2013-12-02 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies show that uncertainty shocks have quantitatively important effects on the real economy. This paper examines one particular channel at work: the supply of credit. It presents a model in which a bank, even if managed by risk-neutral shareholders and subject to limited liability, can exhibit self-insurance, and thus loan supply contracts when uncertainty increases. This prediction is tested with the universe of U.S. commercial banks over the period 1984-2010. Identification of credit supply is achieved by looking at the differential response of banks according to their level of capitalization. Consistent with the theoretical predictions, increases in uncertainty reduce the supply of credit, more so for banks with lower levels of capitalization. These results are weaker for large banks, and are robust to controlling for the lending and capital channels of monetary policy, to different measures of uncertainty, and to breaking the dataset in subsamples. Quantitatively, uncertainty shocks are almost as important as monetary policy ones with regards to the effects on the supply of credit.
Book Synopsis Modeling with Macro-Financial Linkages by : Ms.Inci Ötker
Download or read book Modeling with Macro-Financial Linkages written by Ms.Inci Ötker and published by International Monetary Fund. This book was released on 2009-06 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the evolution of the degree of global cyclical interdependence over the period 1960-2005. We categorize the 106 countries in our sample into three groups-industrial countries, emerging markets, and other developing economies. Using a dynamic factor model, we then decompose macroeconomic fluctuations in key macroeconomic aggregates-output, consumption, and investment-into different factors. These are: (i) a global factor, which picks up fluctuations that are common across all variables and countries; (ii) three group-specific factors, which capture fluctuations that are common to all variables and all countries within each group of countries; (iii) country factors, which are common across all aggregates in a given country; and (iv) idiosyncratic factors specific to each time series. Our main result is that, during the period of globalization (1985-2005), there has been some convergence of business cycle fluctuations among the group of industrial economies and among the group of emerging market economies. Surprisingly, there has been a concomitant decline in the relative importance of the global factor. In other words, there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them.
Book Synopsis International Macroeconomics in the Wake of the Global Financial Crisis by : Laurent Ferrara
Download or read book International Macroeconomics in the Wake of the Global Financial Crisis written by Laurent Ferrara and published by Springer. This book was released on 2018-06-13 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Book Synopsis A Theory of Domestic and International Trade Finance by : Mr.JaeBin Ahn
Download or read book A Theory of Domestic and International Trade Finance written by Mr.JaeBin Ahn and published by International Monetary Fund. This book was released on 2011-11-01 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a theory model of trade finance to explain the "great trade collapse." The model shows that, first, the riskiness of international transactions rises relative to domestic transactions during economic downturns, and second, the exclusive use of a letter of credit in international transactions exacerbates a collapse in trade during a financial crisis. The basic model considers banks' optimal screening decisions in the presence of counterparty default risks. In equilibrium, banks will maintain a higher precision screening test for domestic firms and a lower precision screening test for foreign firms, which constitutes the main mechanism of the model.
Book Synopsis Liquidity, Markets and Trading in Action by : Deniz Ozenbas
Download or read book Liquidity, Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
