| Summary: | 碩士 === 世新大學 === 經濟學研究所(含碩專班) === 95 === This paper discusses the role of trade credit in the transmission of monetary policy. Previous research has shown that during monetary contractions, banks restrict some firms’ loans. Gertler and Gilchrist (1994) show that under tight monetary policy, small firms suffer loan growth reductions while large firms actually get more loans from banks. If borrowers have different sources of financing, and it turns out that bank loans fall by more than other forms of financing, it could indicate that there has not been a fall in the demand for credit but rather a fall in the supply of bank loans. This would then indicate that bank loans and bonds are imperfect substitutes, so that lending channels are important. Kashyap, Stein and Wilcox (1993) suggests that small firms issue more commercial paper as a substitute form of credit during monetary contractions. Nilsen (2002) observes the substitution of trade credit for commercial paper and finds when monetary policy tightens small firms increases trade credit. Surprisingly, large firms also increase trade credit.
This article uses data from major Taiwanese manufacturing firms that have been listed on the market for at least eight years. During monetary tightening, we find these major firms increase trade credit. This result is similar to the results obtained by Nilsen (2002) and Jian-Ying Li (2006). Nilsen (2002) does not measure credit ratings. This paper uses the method of Mateut , Bougheas and Mizen (2006) to introduce credit ratings into the model , and also uses the method of Gertler and Gilchrist (1994) to classify firms according to capital. We find, when there is a monetary tightening, small and medium firms increase trade credit, however, the increase in trade credit by large firms is not statistically significant. This article finds small and medium firms’ trade credit tends to be financial and large firms’ trade credit tends to be transactional.
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