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Trade credit, trade finance, and the Covid-19 Crisis

Author

Listed:
  • Frederic Boissay
  • Nikhil Patel
  • Hyun Song Shin

Abstract

As the Covid-19 pandemic hits economic activity, the vulnerabilities of longer and more geographically extended trade credit chains are coming to the fore, especially those related to international trade. While risk mitigation is available from financial intermediaries, the bulk of the exposures associated with supply chains is borne by the participating firms themselves, through inter-firm credit. Given the prevalence of the US dollar in trade financing, measures such as central bank swap lines that ease global dollar credit conditions may cushion the impact of the pandemic on global value chains.

Suggested Citation

  • Frederic Boissay & Nikhil Patel & Hyun Song Shin, 2020. "Trade credit, trade finance, and the Covid-19 Crisis," BIS Bulletins 24, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:24
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    References listed on IDEAS

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    Cited by:

    1. Hyun, Junghwan, 2021. "Trade credit, group affiliation, and credit contraction: Evidence from the 1997 Korean financial crisis," Economic Modelling, Elsevier, vol. 95(C), pages 203-214.
    2. Aizenman, Joshua & Ito, Hiro & Pasricha, Gurnain Kaur, 2022. "Central bank swap arrangements in the COVID-19 crisis," Journal of International Money and Finance, Elsevier, vol. 122(C).
    3. Seerattan, Dave, 2023. "Hurricane clauses in debt contracts in the context of unsustainable debt in Barbados and Grenada," Documentos de Proyectos 48714, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. Yadav, Sandeep & Srivastava, Jagriti, 2021. "CSR, audit quality and firm performance during COVID-19: an organizational legitimacy perspective," MPRA Paper 108967, University Library of Munich, Germany.
    5. Ferrari Minesso, Massimo & Gräb, Johannes, 2022. "E pluribus plures: shock dependency of the USD pass-through to real and financial variables," Working Paper Series 2684, European Central Bank.
    6. Villarreal, Francisco G. & Cerón Moscoso, Nicolás & Pérez Caldentey, Esteban, 2023. "Special Drawing Rights: advantages, limitations, and innovative uses," Documentos de Proyectos 48711, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Schroeder, Susan K., 2023. "A multilateral credit rating agency," Documentos de Proyectos 48716, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. -, 2023. "Innovative financing instruments in Latin America and the Caribbean," Documentos de Proyectos 48669, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    9. Jagriti Srivastava & Balagopal Gopalakrishnan, 2021. "In-kind financing during a pandemic: Trade credit and COVID-19," Working papers 473, Indian Institute of Management Kozhikode.
    10. Zhang, Cheng & Lee, Yun-Chi & Ho, Kung-Cheng & Shen, Xixi, 2023. "Influence of institutional differences on trade credit use during pandemics," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    11. Marc Auboin, 2021. "Trade Finance, Gaps and the Covid-19 Pandemic: A Review of Events and Policy Responses to Date," CESifo Working Paper Series 8918, CESifo.
    12. Hernández Trillo, Fausto, 2023. "Income-linked bonds," Documentos de Proyectos 48713, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Se-Jik Kim & Hyun Song Shin, 2023. "Theory of supply chains: a working capital approach," BIS Working Papers 1070, Bank for International Settlements.
    14. Mark Choi & Linda S. Goldberg & Robert Lerman & Fabiola Ravazzolo, 2021. "COVID Response: The Fed’s Central Bank Swap Lines and FIMA Repo Facility," Staff Reports 983, Federal Reserve Bank of New York.
    15. Vera Azaf, Leonardo, 2023. "State-contingent debt instruments as insurance against future sovereign debt crises in Latin American," Documentos de Proyectos 48712, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    16. Lo Nigro, Giovanna & Favara, Giovanni & Abbate, Lorenzo, 2021. "Supply chain finance: The role of credit rating and retailer effort on optimal contracts," International Journal of Production Economics, Elsevier, vol. 240(C).
    17. Pérez Caldentey, Esteban, 2023. "Sustainable finance," Documentos de Proyectos 48715, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    18. Al-Hadi, Ahmed & Al-Abri, Almukhtar, 2022. "Firm-level trade credit responses to COVID-19-induced monetary and fiscal policies: International evidence," Research in International Business and Finance, Elsevier, vol. 60(C).
    19. Auboin, Marc, 2021. "Trade finance, gaps and the covid-19 pandemic: A review of events and policy responses to date," WTO Staff Working Papers ERSD-2021-5, World Trade Organization (WTO), Economic Research and Statistics Division.
    20. Yang, Yang & Liu, Jie, 2023. "Price timing and financing strategies for a capital-constrained supply chain with price-dependent stochastic demand," International Journal of Production Economics, Elsevier, vol. 261(C).
    21. Srivastava, Jagriti & Gopalakrishnan, Balagopal, 2021. "In-kind financing during a pandemic: Trade credit and COVID-19," MPRA Paper 108951, University Library of Munich, Germany.
    22. Pham, Tien Duc & Dwyer, Larry & Su, Jen-Je & Ngo, Tramy, 2021. "COVID-19 impacts of inbound tourism on Australian economy," Annals of Tourism Research, Elsevier, vol. 88(C).

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