In this paper we hypothesize that greater macroeconomic uncertainty would cause firms to increasingly turn to their suppliers as a source of finance, making greater use of trade credit. We test this hypothesis using a panel of non–financial firms drawn from the annual COMPUSTAT database and show that an increase in macroeconomic uncertainty leads to a narrowing of the cross–sectional distributi...

We study an economy in which exchange occurs pairwise, there is no commitment, and anonymous agents choose between random monetary trade or deterministic credit trade. To accomplish the latter, agents can exploit a costly technology that allows limited recordkeeping and enforcement. An equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small....

We compare allocations sustained by credit with allocations sustained by bank notes (inside money) in a search model with decentralized trade and limited monitoring. We demonstrate that there exists a credit arrangement that is superior to inside money. However, in contrast with inside money, this arrangement is not robust to an expansion of trade that is not accompanied by an adequate increase...

This paper tests for the e¤ects of increased trade and …nancial integration on business cycle co-movement. Using both quantitative theory and a reduced form empirical approach motivated by the theory, I measure and explain the channels from bilateral trade integration, …nancial integration, and industrial specialization to cyclical co-movement. The model is also used to measure the causal chann...

Trade credit has many forms in today’s business practice. The most common form of trade credit policy that is used to encourage retailers to buy larger quantities is order-size dependent. When the number of ordered units exceeds the capacity of the own warehouse, an additional rented warehouse is required to store the excess units. Therefore, to incorporate the concept of order-size dependent t...

Changes in the terms of trade affect both the incentives and the ability of individuals to purchase education in a credit-constrained economy. A model is developed that shows how individual decision-making is affected in a small economy when it opens up to trade. Empirical results indicate that credit constraints are an important factor influencing school enrollment rates, particularly in low i...