Business Intelligence

Trade Credit And International Trade During The Global Financial Crisis

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Executive Summary

This paper studies the role of the credit crunch at the height of the global financial crisis in the severe contraction of trade and economic activity using firm-level data from a number of emerging market economies in East Asia. The authors find that, although the dire financial conditions during the crisis adversely affected the sales of all firms, sales declined by less for firms with better pre-crisis financial conditions. In the face of the decline in external financing opportunities, some firms relied more on trade credit to supplement operating capital, and firms that were able to replace external finance with trade credit had better sales performance.

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