Trade Credit and Exchange Rate Risk Pass Through

31.03.2025 14:15 – 15:30

GENEVA TRADE AND DEVELOPMENT WORKSHOP

(jointly with Bryan Hardy, Bank for International Settlements, and Felipe E. Saffie, Darden School of Business, University of Virginia, and NBER)

Abstract:

Large firms borrow in foreign currency and are net providers of trade credit to firms in their supply chains. We model the transmission of exchange rate risk via firm balance sheets along the supply chain. Trade credit loosens borrowing constraints and allows for higher production. Furthermore, firms are more likely to pass-through exchange rate shocks to their balance sheets onto their partners the more they are financially constrained. We validate these predictions using a quarterly firm panel for 19 emerging markets. Trade credit constitutes an important transmission mechanism of exchange rate shocks, but firms tend to protect their trading partners.

Biography:

Ina Simonovska is a professor of economics at UC Davis and a research associate at the NBER and CEPR. Her research interests span international finance, macro and trade. She has a strong interest in trade and AI/innovation policies.

Lieu

Bâtiment: Uni Mail

University of Geneva
Uni Mail
Boulevard du Pont-d'Arve 40
1205 Geneva
Room M 3250, 3rd floor

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