Trade credit, trade income elasticity and the international transmission of shocks
Authors
Publication Date
2021-07-27Journal Title
Eurasian Economic Review
ISSN
1309-422X
Publisher
Springer International Publishing
Volume
11
Issue
4
Pages
687-733
Language
en
Type
Article
This Version
VoR
Metadata
Show full item recordCitation
Watson, A. (2021). Trade credit, trade income elasticity and the international transmission of shocks. Eurasian Economic Review, 11 (4), 687-733. https://doi.org/10.1007/s40822-021-00178-1
Description
Funder: Economic and Social Research Council; doi: http://dx.doi.org/10.13039/501100000269
Funder: Corpus Christi College, University of Cambridge; doi: http://dx.doi.org/10.13039/501100000591
Abstract
Abstract: The paper examines the impact of trade credit on cyclical fluctuations in international trade. It provides new empirical evidence based on firm-level UK and Irish data showing that exporters use trade credit more actively and intensively than non-exporters. The study introduces inter-firm lending into an open economy general equilibrium model with heterogeneous firms and endogenous entry into the exports market. It demonstrates that trade credit amplifies the impact of macroeconomic shocks on international trade both along the intensive and extensive margins and that it significantly contributes to the high trade income elasticity observed in the data.
Keywords
Original Paper, Trade credit, International trade, Business cycle fluctuations, Trade income elasticity, F41, E32, E51
Identifiers
s40822-021-00178-1, 178
External DOI: https://doi.org/10.1007/s40822-021-00178-1
This record's URL: https://www.repository.cam.ac.uk/handle/1810/330403
Rights
Licence:
http://creativecommons.org/licenses/by/4.0/
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