financially constrained, than during the loose period.

Table 7 shows direct evidence

of substitution (through the negative coefficient), and is entirely consistent with the
reported result in Atanasova and Wilson (2004) where there was also a significant
negative relationship between bank lending and trade credit.
By evaluating the responses of trade credit and bank loans when interest rates take
their mean values during tight and loose periods of monetary policy it is possible to
determine the effect at the mean of the monetary policy stance. We report the figures
ARTICLE IN PRESS DALAM PASAL PRESS
Table 6 Tabel 6
Bank loans=total liabilities  100 (response of trade credit ratio to tight monetary policy (1990–
1992)
versus loose monetary policy (1993–1999))
DTI definition
Total assets definition
Small Kecil
Medium Medium
Large Besar
Small Kecil
Medium Medium
Large Besar
MS MS
À1.516
*** ***
À0.037
0.451 0,451
*** ***
À1.534
*** ***
À0.339
*** ***
0.442 0,442
*** ***
(0.117) (0,117)
(0.065)
(0.065)
(0.121)
(0.069) (0,069)
(0.062)
MSD MSD
1.758 1,758
*** ***
0.342 0,342
** **
À0.085
1.799 1,799
*** ***
0.738 0,738
*** ***
À0.054
(0.222)
(0.141) (0,141)
(0.140)
(0.227)
(0.146)
(0.134)
Solvency Daya larut
0.238 0,238
*** ***
0.306 0,306
*** ***
0.307 0,307
*** ***
0.264 0,264
*** ***
0.287 0,287
*** ***
0.273
*** ***
(0.018) (0,018)
(0.013) (0,013)
(0.013) (0,013)
(0.019) (0,019)
(0.014) (0,014)
(0.012) (0,012)
Solvency D
À0.101
*** ***
À0.069
*** ***
À0.039
*** ***
À0.082
*** ***
À0.095
*** ***
À0.037
*** ***
(0.019) (0,019)
(0.013) (0,013)
(0.013) (0,013)
(0.020) (0,020)
(0.014) (0,014)
(0.012) (0,012)
Quiscore
À0.656
*** ***
À0.720
*** ***
À0.762
*** ***
À0.702
*** ***
À0.699
*** ***
À0.723
*** ***
(0.019) (0,019)
(0.013) (0,013)
(0.012) (0,012)
(0.020) (0,020)
(0.014) (0,014)
(0.011) (0,011)
Quiscore D
0.073 0,073
*** ***
0.016 0,016
0.027 0,027
** **
0.080 0,080
*** ***
0.037 0,037
** **
0.025 0,025
** **
(0.021) (0,021)
(0.014) (0,014)
(0.013) (0,013)
(0.022) (0,022)
(0.015) (0,015)
(0.012) (0,012)
Age Usia
0.548 0,548
*** ***
0.536 0,536
*** ***
0.648 0,648
*** ***
0.445
*** ***
0.526 0,526
*** ***
0.727 0,727
*** ***
(0.070)
(0.045) (0,045)
(0.043) (0,043)
(0.073) (0,073)
(0.046) (0,046)
(0.040) (0,040)
Age D
À0.030
**
À0.020
*** ***
À0.030
*** ***
À0.050
*** ***
À0.032
*** ***
À0.033
*** ***
(0.015) (0,015)
(0.008) (0,008)
(0.006) (0,006)
(0.017)
(0.008) (0,008)
(0.006) (0,006)
Sales Penjualan
À1.209
** **
3.450 3,450
*** ***
À1.676
*** ***
À1.435
*** ***
1.493
*** ***
À2.726
*** ***
(0.514)
(0.424)
(0.275)
(0.517)
(0.358)
(0.206)
Sales D
0.565 0,565
À3.116
*** ***
0.110 0,110
À0.111
À3.080
*** ***
À0.001
(0.460)
(0.386)
(0.154)
(0.443)
(0.322)
(0.134)
Constant Konstan
66.302
*** ***
11.392 11,392
*** ***
49.821
*** ***
70.836
*** ***
31.689
*** ***
57.653
*** ***
(3.975)
(3.758)
(3.161)
(3.978)
(3.268)
(2.564)
DD
À21.293
*** ***
25.422
*** ***
1.122 1,122
À17.115
*** ***
21.387
*** ***
2.062 2,062
(3.813)
(3.515)
(1.991)
(3.762)
(2.989)
(1.755)
Observations Pengamatan
20,516
37,120
36,353
17,799 17.799
35,692
43,811
No. of id
4960
7483
5388
4210 4.210
7500 7.500
6486
RR
22
0.20 0,20
0.25 0,25
0.28 0,28
0.22 0,22
0.23
0.26 0,26
Notes : Monetary stance (MS) represents the level of base rates. D represents a dummy variable
for the
loose monetary period. The coefficients referring to the tight monetary period are given by the
non-
interacted variables. The impact on the dependent variable when monetary policy is loose is
given by the
sum of the coefficients associated with a given variable and with the variable interacted with the
period
dummy. dummy. Standard errors in parentheses. Standar kesalahan dalam tanda kurung.
**
Indicates significance at 10%
** **
indicates significance at 5%
*** ***
indicates significance at 1%.
S. Mateut et al. / European Economic Review 50 (2006) 603–629
624 624

Page 23 Page 23
in Table 8 calculated from coefficients on the MS and MSD variables reported in
Tables 5 and 6 , which indicate the response to monetary stance after we have
conditioned for other controls. Our table of figures gives the magnitude of the
change in the trade credit–total liabilities ratio and the bank loans–total liabilities
ratio when interest rates take their average values for tight and loose periods,
respectively (reported in rows 1 and 2 for Table 5 and rows 3 and 4 for Table 6 ). ). We Kita
evaluate the response to interest rates for small, medium and large firms and report
ARTICLE IN PRESS DALAM PASAL PRESS
Table 7 Tabel 7
Trade credit=total liabilities  100 (response of trade credit ratio to Tight Monetary Policy
(1990–1992)
versus Loose Monetary Policy (1993–1999))
DTI definition
Total assets definition
Small Kecil
Medium Medium
large besar
Small Kecil
Medium Medium
Large Besar
Bank Bank
À0.431
*** ***
À0.373
*** ***
À0.243
*** ***
À0.449
*** ***
À0.399
*** ***
À0.248
*** ***
(0.011) (0,011)
(0.007) (0,007)
(0.006) (0,006)
(0.013) (0,013)
(0.008) (0,008)
(0.005) (0,005)
Bank D
0.120 0,120
*** ***
0.109
*** ***
0.070 0,070
*** ***
0.125 0,125
*** ***
0.127 0,127
*** ***
0.070 0,070
*** ***
(0.012) (0,012)
(0.008) (0,008)
(0.006) (0,006)
(0.013) (0,013)
(0.008) (0,008)
(0.005) (0,005)
Solvency Daya larut
0.204 0,204
*** ***
0.334 0,334
*** ***
0.405 0,405
*** ***
0.178 0,178
*** ***
0.327 0,327
*** ***
0.370 0,370
*** ***
(0.017)
(0.011) (0,011)
(0.009) (0,009)
(0.019) (0,019)
(0.012) (0,012)
(0.008) (0,008)
Solvency D
0.065 0,065
*** ***
À0.010
À0.085
*** ***
0.086 0,086
*** ***
À0.007
À0.068
*** ***
(0.017)
(0.011) (0,011)
(0.009) (0,009)
(0.019) (0,019)
(0.012) (0,012)
(0.008) (0,008)
Quiscore
À0.197
*** ***
À0.186
*** ***
À0.169
*** ***
À0.199
*** ***
À0.204
*** ***
À0.147
*** ***
(0.019) (0,019)
(0.012) (0,012)
(0.010) (0,010)
(0.022) (0,022)
(0.013) (0,013)
(0.009) (0,009)
Quiscore D
À0.036
**
À0.030
** **
0.020 0,020
**
À0.047
** **
À0.018
0.006 0,006
(0.020) (0,020)
(0.013) (0,013)
(0.011) (0,011)
(0.023)
(0.014) (0,014)
(0.009) (0,009)
Age Usia
À0.357
*** ***
À0.593
*** ***
À0.616
*** ***
À0.271
*** ***
À0.523
*** ***
À0.637
*** ***
(0.060)
(0.037) (0,037)
(0.030) (0,030)
(0.067) (0,067)
(0.039) (0,039)
(0.027) (0,027)
Age D
0.010 0,010
0.001 0,001
À0.001
À0.017
0.005 0,005
À0.001
(0.014) (0,014)
(0.007) (0,007)
(0.005) (0,005)
(0.016) (0,016)
(0.007) (0,007)
(0.004) (0,004)
Sales Penjualan
3.454
*** ***
2.505
*** ***
2.832
*** ***
3.200
*** ***
5.048
*** ***
3.869 3,869
*** ***
(0.457) (0,457)
(0.361)
(0.200)
(0.488)
(0.309)
(0.145) (0,145)
Sales D
À0.171
0.851 0,851
*** ***
À0.771
*** ***
0.103 0,103
À0.690
** **
À0.887
*** ***
(0.410)
(0.329)
(0.112) (0,112)
(0.420)
(0.279)
(0.094)
Constant Konstan
28.203
*** ***
36.955
*** ***
25.001
*** ***
31.186
*** ***
15.290
*** ***
14.511
*** ***
(3.358)
(3.112)
(2.214)
(3.567)
(2.743)
(1.718)
DD
À2.363
À10.917
*** ***
4.376
*** ***
À3.877
0.923 0,923
5.846
*** ***
(3.139)
(2.884)
(1.302)
(3.285)
(2.497)
(1.107)
Observations Pengamatan
20,516
37,120
36,353
17,799 17.799
35,692
43,811
No. of id
4960
7483
5388
4210 4.210
7500 7.500
6486
RR
22
0.17 0,17
0.20 0,20
0.24 0,24
0.16 0,16
0.19 0,19
0.24 0,24
Notes : Monetary stance (MS) represents the level of base rates. D represents a dummy variable
for the
loose monetary period. The coefficients referring to the tight monetary period are given by the
non-
interacted variables. The impact on the dependent variable when monetary policy is loose is
given by the
sum of the coefficients associated with a given variable and with the variable interacted with the
period
dummy. dummy. Standard errors in parentheses. Standar kesalahan dalam tanda kurung.
**
Indicates significance at 10%
** **
indicates significance at 5%
*** ***
indicates significance at 1%.
S. Mateut et al. / European Economic Review 50 (2006) 603–629
625 625
 Page 24 Page 24
the findings for DTI and total asset based definitions of size. Row 1 shows that all
types of firms increase their trade credit–total liabilities ratio in tight periods of
policy and the magnitudes of the responses are not greatly different; this contrasts
with the loose period when the response in row 2 is negligible. Contrasting these
results with the responses in rows 3 and 4 shows that small firms reduce their bank
loans–total liabilities ratio in tight periods, while large firms continue to see the ratio
increase, but in loose periods all firms increase their bank loan–total liability ratio.
Inspection of the magnitudes implies that small firms increase their trade credit–total
liability ratio by almost exactly the same amount as their bank loan–total liability
ratio falls in tight periods. This offers further evidence that these firms substitute one
form of finance for the other.
In our model we cannot define exactly what the cut-off values for the critical wealth
levels might be when we attempt to determine the access to sources of finance for
different types. The significant difference in the responses of small firms compared to
medium and large firms to a tightening of monetary policy suggests that the cut-off
for bank loans occurs somewhere between the size of small firms (less than £1.4m)
and medium-sized firms (less than £5.6m). Small firms experience far less bank loans
and more trade credit in tight periods of monetary policy than medium and large
firms. perusahaan. This confirms that the composition of corporate finance changes significantly
between tight and loose periods of monetary policy and that the responses are
significantly different for small firms compared to medium and large firms.
9. 9. Conclusions Kesimpulan
The paper analyzes the channel of monetary policy transmission when trade credit
is included among the sources of external finance. Due to imperfections in the credit
ARTICLE IN PRESS DALAM PASAL PRESS
Table 8 Tabel 8
Magnitude of changes
DTI definition
Total assets definition
Small Kecil
Medium Medium
Large Besar
Small Kecil
Medium Medium
Large Besar
Table 5 Tabel 5
19.60388
16.81863
16.65199
19.66339
16.84243
16.81863
0.098667
À1.073
0.6105
À0.36383
À0.962
0.326833
Table 6 Tabel 6
À18.0446
À0.4404
5.368154
À18.2589
À4.03504
5.261029
1.492333
1.880833
2.257
1.634167
2.4605
2.392667
Notes : The table gives the magnitude of the change in the trade credit–total liabilities ratio (rows
1 and 2)
and the bank loans–total liabilities ratio (rows 3 and 4) when interest rates take their average
values for
tight and loose periods respectively. Figures in row 1/(row 3) are given by the coefficients
associated with
the MS variable in Table 5/(Table 6) multiplied by the mean value of the interest rate in the tight
money
period. periode. Figures in row 2/(row 4) are given by the sum of the coefficients associated with
the MS and MSD
variables in 5/(6) multiplied by the mean value of the interest rate in the loose money period.
S. Mateut et al. / European Economic Review 50 (2006) 603–629
626 626

Page 25 Page 25
market, banks observe firms' returns at a cost and, therefore, charge their clients higher
interest rates proportional to the amount that they lend. Since sellers have an information
advantage over banks, they may have incentives to ameliorate credit conditions for
borrowers and at the same time increase their profits. The credit market equilibrium in
our model is characterized by high wealth firms borrowing from banks, intermediate
wealth level firms taking trade credit, and low wealth level firms not running their
projects. proyek. In this framework, we examine the consequences of a monetary policy change.
We predict that a monetary tightening causes two main results: (a) a decrease in bank
loans relative to trade credit if the outflows of firms seeking funds at the lower end of the
wealth spectrum exceeds the inflows from the upper end; (b) a flight-to-quality effect for
bank borrowers. The results are consistent with the existing empirical literature that has
identified a wider use of trade credit over periods of monetary tightening.
When we examine the evidence using panel data from 16,000 manufacturing firms
in the UK we find that all our predictions are upheld. Bank loans decline in absolute
and relative terms and trade credit increases. When we separate small firms from
medium and large firms, and compare the responses over tight and loose monetary
policy we find that it is the small (financially weaker firms) that are excluded from
bank loans and these firms resort to trade credit. This is the case even when we take
into account the effects of solvency, age, credit rating, sales and demand side effects.
The magnitudes of the responses of small firms are many multiples of the responses
of medium and large firms, which show practically identical responses. This suggests Hal ini
menunjukkan
that the cut-off for bank loans (when asset levels are used to proxy firm size) occurs
somewhere between the small and medium firm size.
The model suggests that financially constrained firms that are excluded from bank
loans can still receive credit from other firms. This implies that the influence of a
given increase in interest rates should have a more muted effect than if there is no
alternative to bank finance. The existence of trade credit weakens the influence of the
credit channel to some degree, although it is more expensive than bank loans and is
typically only held for the short term.
Acknowledgements Ucapan Terima Kasih
We acknowledge beneficial comments from the Editor Juergen von Hagen, two
anonymous referees and Ayi Ayayi, Giuseppe Bertola, Gabriella Chiesa, Frank
Hahn, Piercarlo Zanchettin. The paper has also benefited from comments at the
Scottish Economic Society Conference 2002, Portuguese Finance Network 2002,
Royal Economic Society Conference 2003, European Economic Association
Conference 2003. Any remaining errors are our own.
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