The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-financial Firms in Turkey

The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-financial Firms in Turkey

Title : The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-financial Firms in Turkey
Number : 10/16
Author(s) : Pınar Özlü, Cihan Yalçın
Language : English
Date : September 2010
Abstract : This study investigates the trade credit channel of monetary policy transmission in Turkey by using a large data set of corporate firms, which includes detailed information on balance sheets and income statements of firms regularly reported to the Central Bank of the Republic of Turkey (CBRT) in the period of 1996-2008. It suggests that the composition of external finance differs considerably across firm types based on size and export performance under tight and loose financial conditions. For both manufacturing and non-manufacturing firms, small and medium-sized firms (SMEs) and firms with low export share are financially constrained especially in tight periods. Findings suggest that those firms, which are financially constrained, tend to substitute trade credits for bank loans in tight periods. On the other hand, the evidence for large and export-oriented firms differs significantly across manufacturing and non-manufacturing sectors such that manufacturing firms are more likely to have access to bank finance in tight periods compared to non-manufacturing firms. Large trade credits volume in firms’ balance sheets and its response to monetary stance imply that trade credit channel may mute the traditional credit channel of monetary transmission
Keywords : Credit Channel; Trade Credits; Monetary Policy Transmission
JEL Codes : E44, E52

The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-financial Firms in Turkey
CENTRAL BANK OF THE REPUBLIC OF TURKEY Head Office Anafartalar Mah. İstiklal Cad. No:10 06050 Ulus Altındağ Ankara Phone : (+90 312) 507 50 00 | Fax : (+90 312) 507 56 40