Research
Trade Networks and Natural Disasters: Diversion, not Destruction
Job Market Paper - With Timothée Gigout.
We study how international trade networks react to natural disasters. We combine exhaustive firm-to-firm trade credit and disaster data and use a dynamic difference-in-differences identification strategy. We establish the causal effect of natural disasters abroad on the size, shape and credit quality of French exporters’ international trade networks. We find evidence of large and persistent disruptions to international buyer-supplier relationships. This leads to a restructuring of the trade network of the largest French exporters and a change in trade finance sources for affected countries. We find strong and permanent negative effects on the trade credit sales of French suppliers to affected destinations. The largest firms are driving the response, both on the supplier and buyer side. Trade network restructuring towards unaffected destinations is higher for large multinationals trading more homogeneous products. This effect operates exclusively through a reduction in the number of buyers. This induces a negative shift in the distribution of the credit quality of buyers in the destination affected by the natural disaster.
Cross-Sector Interactions in Western Europe: Lessons From Trade Credit Data
R&R Journal of International Economics
Large-scale analyses to map interactions between financial health at the sectoral level are still scarce. To fill the gap, in this paper, I map a network of predictive relationships across the financial health of several sectors. I provide a new advanced indicator to track propagation of financial distress across industries and countries on a monthly basis. I use defaults on trade credit as a measure of firms’ worsening financial conditions in a sector. To control for omitted variable bias, I apply a high-dimensional VAR analysis, and isolate direct cross-sector causalities à la Granger from common exposure to macroeconomic shocks or to third sector shock. I show that monitoring some key sectors – among which construction, wholesale and retail, or the automotive sector – can improve the detection of financial distress in other sectors. Finally, I find that those financial predictive relationships correlates with the input-output structure in the considered economies. Such structure of financial interactions reflect the propagation of financial distress along the supply chain, between suppliers and their buyers.
US Monetary Policy Spillovers To Emerging Markets: The Trade Credit Channel
with Maéva Silvestrini
We analyze the effect of exogenous US monetary policy shocks on trade credit flows towards emerging markets. We use a proprietary database on firm-to-firm trade credit flows. We find trade credit to be an additional pass-through channel of US monetary policy to emerging markets and a substitute to other types of financing for EM importers. Using the granularity of the data, we distinguish between different mechanisms. Specifically, US monetary tightening exerts three distinct effects. First, it increases EM importers’ demand for trade credit, used as a substitute to other financing tools themselves restrained. Second, it restricts US suppliers’ ability to extend trade credit to their EM customers, thus acting as a liquidity squeeze. Finally, it also affects trade credit flows through an exchange rate channel, impacting differently USD and non-USD flows.