Trade credit, sovereign risk and monetary policy in Europe

The purpose of this article is to analyze how sovereign risk influences the use of trade credit, both directly and through monetary policy. In addition, we test whether these effects differ during the crisis as compared to before the crisis. Using a sample of 45,864 Eurozone firms (2005–2012), we fi...

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Bibliographic Details
Published in:International review of economics & finance 2017-11, Vol.52, p.39-54
Main Authors: Cantero Sáiz, María, Sanfilippo Azofra, Sergio, Torre Olmo, Begoña, López Gutiérrez, Carlos
Format: Article
Language:English
Subjects:
Monetary policy
Sovereign risk
Trade credit
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Summary:The purpose of this article is to analyze how sovereign risk influences the use of trade credit, both directly and through monetary policy. In addition, we test whether these effects differ during the crisis as compared to before the crisis. Using a sample of 45,864 Eurozone firms (2005–2012), we find that trade credit received increases when sovereign risk becomes higher, but only before the crisis. However, during the crisis, trade credit supply decreases as sovereign risk increases. Additionally, monetary restrictions only lead to an increase in trade credit in low or moderate sovereign risk countries. •We study how sovereign risk affects trade credit, directly and through monetary policy.•During the crisis, trade credit supply decreases as sovereign risk increases.•Trade credit received increases as sovereign risk rises, but only before the crisis.•Monetary restrictions increase trade credit only in low-moderate sovereign risk countries.
ISSN:1059-0560
1873-8036
DOI:10.1016/j.iref.2017.09.010