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US monetary policy spillovers to emerging markets: The role of trade credit

Year: 2025

Type: article

Abstract: This paper provides empirical evidence on the impact of US monetary policy surprises on firm-to-firm trade credit in emerging markets, using a proprietary firm-level database. We show that trade credit acts as a buffer against the adverse effects of US monetary tightening, which, by constraining global financial conditions, increases reliance on trade credit as an alternative financing source. This effect is more pronounced for buyers with poor credit quality, who are primarily affected when financial conditions tighten. This later effect only exists in pre-existing relationships, where trust can be more readily established, compared to new partnerships. Given the widespread use of trade credit in emerging markets, this buffering role is crucial for mitigating financial pressures in these economies.

Source: Journal of International Economics

DOI: 10.1016/j.jinteco.2025.104064

Authors: Mélina London, Maéva Silvestrini

Institutions: European Commission, Joint Research Centre, Banque de France, Université Paris Dauphine-PSL

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,300