Katharina Eck, Martina Engemann, Monika Schnitzer, 20 April 2015

Credits extended bilaterally between firms, so called trade credits, are particularly expensive yet many firms use it, especially for international transactions. This column argues that such cash-in-advance financing serves as a credible signal of quality. Data from a unique survey of German firms show that it fosters export participation in particular for firms that tend to have the greatest difficulties in entering foreign markets.

Thomas Philippon, Virgiliu Midrigan, 16 May 2011

In the recent US recession, those states which saw the biggest increases in household leverage during the credit boom suffered greatest hits to output and employment rates. The authors of CEPR DP 8381 try to understand this anomaly with a new model of a cash-in-advance economy, where economic activity is highly sensitive to credit conditions. They argue that this framework supports the use of expansionary monetary policy to mitigate recessions.

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