holding and its substitutes, trade credit and short-term bank finance, the study develops a panel vector autoregression that … signalling theory of trade credit and show that firms experiencing liquidity shocks resort to cash or trade credit but not to … bank finance. Increasing cash improves access to trade credit. Additional cash or trade credit triggers a slowdown of the …

This paper reviews empirical evidence on the use of bank lines of credit as a source of corporate liquidity …. Traditional explanation for lines of credit is that they provide insurance against liquidity shocks, in much the same as way … hoarding cash does. However, recent empirical research suggests that access to lines of credit is contingent on the credit …

between cash and bank credit lines. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms … with high aggregate risk find it costly to get credit lines and opt for cash in spite of higher opportunity costs and … liquidity premium. Likewise, in times when aggregate risk is high, firms rely more on cash than on credit lines. We verify these …

We present a dynamic cash-management model where agents choose whether to pay with cash or credit at every point in … time. In the model credit usage depends on the current stock of cash, a novel result that matches recent micro evidence on … household's payment choices. The optimality of such decision rule is novel and cannot be obtained by models where cash-credit …

higher risk and financially constrained firms. We also find that restrictions to aggregate credit supply have a smaller …