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Trade credit, trade income elasticity and the international transmission of shocks

Accepted version
Peer-reviewed

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Article

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Abstract

jats:titleAbstract</jats:title>jats:pThe 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.</jats:p>

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Keywords

3801 Applied Economics, 3802 Econometrics, 3803 Economic Theory, 35 Commerce, Management, Tourism and Services, 38 Economics, 3502 Banking, Finance and Investment

Journal Title

Eurasian Economic Review

Conference Name

Journal ISSN

1309-422X
2147-429X

Volume Title

11

Publisher

Springer Science and Business Media LLC

Rights

All rights reserved
Sponsorship
Economic and Social Research Council, UK, and Cor pus Christi College, Cambridge, UK