June 2011 (Revised July 2012)

Financial Frictions, Trade Credit, and the 2008-09 Global Financial Crisis

Brahima Coulibaly, Horacio Sapriza, and Andrei Zlate


This paper studies the role of the credit crunch in the severe contraction of economic activity during the 2008-09 global financial crisis, using firm-level data from six emerging Asian economies. After controlling for the effect of falling demand, we find that sales declined by less for firms with better pre-crisis financial conditions. Amid the decline in external financing opportunities, some firms relied more on trade credit from suppliers during the crisis, which allowed them to post relatively better sales. Export-intensive firms resorted less to trade credit as an alternative source of finance, which contributed to their larger declines in sales.

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Keywords: Trade credit, 2008-09 financial crisis, emerging Asia, international trade

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Last Update: July 10, 2020