Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks?
By Claudio E. Raddatz. Review of Economics and Statistics, 2010
116 citations recorded by the source corpus.
This paper provides evidence of the presence and relevance of the credit chain propagation and amplification mechanism described by Kiyotaki and Moore (1997) by looking at its implications for the correlation of industries. In particular, it tests the hypothesis that an increase in the use of trade credit, along the input-output chain linking two industries, results in an increase in their output correlation using detailed data on the correlations and input-output relations of 378 manufacturing industry pairs across 43 countries with different degrees of use of trade credit. The results provide strong support for this hypothesis and indicate that the mechanism is quantitatively relevant.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/5d38472f1c816872027a08b34db9aa73e4ffe114
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Citations in the corpus
- Supply chain finance: From traditional to supply chain credit rating (2019, background): “These liquidity shortages have a clear supply chain effect: late payments, and even worse defaults, propagate from a company to its suppliers (Raddatz, 2010).”
- Does finance solve the supply chain financing problem (2016, background): “This behaviour led to an increase of financial risk, with a clear supply chain effect: Lost payments propagate from a company to its suppliers (Raddatz, 2010).”
- Credit Market Disruptions and Liquidity Spillover Effects in the Supply Chain (2020, unknown): “The paper is important in light of the burgeoning literature on the transmission of idiosyncratic shocks (e.g., Raddatz 2010; Gabaix 2011; Acemoglu et al. 2012; Carvalho 2014).”