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Credit channel, trade credit channel, and inventory investment: evidence from a panel of UK firms

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  • Alessandra Guariglia

    (University of Nottingham)

  • Simona Mateut

    (University of Nottingham)

Abstract

In this paper, we use a panel of 609 UK firms over the period 1980-2000 to test for the existence of a trade credit channel of transmission of monetary policy, and for whether this channel plays an offsetting effect on the traditional credit channel. We estimate error-correction inventory investment equations augmented with the coverage ratio and the trade credit to assets ratio, differentiating the effects of the latter variables across firms more or less likely to face financing constraints, and firms making a high or low use of trade credit. Our results suggest that both the credit and the trade credit channels operate in the UK, and that the latter channel tends to weaken the former.
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Suggested Citation

  • Alessandra Guariglia & Simona Mateut, 2004. "Credit channel, trade credit channel, and inventory investment: evidence from a panel of UK firms," Money Macro and Finance (MMF) Research Group Conference 2004 16, Money Macro and Finance Research Group.
    • Handle: RePEc:mmf:mmfc04:16
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    References listed on IDEAS

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