Trade credit is the most important form of short-term finance for U.S. firms. In 2017, non-financial firms had about $3 trillion in trade credit outstanding equaling 20 percent of U.S. GDP. Why do sellers lend to their buyers in the presence of a well-developed financial sector? This paper...

Trade credit is the most important form of short-term finance for firms. In 2019, U.S. non-financial firms had about $4.5 trillion in trade credit outstanding equaling 21 percent of U.S. GDP. This paper documents two striking facts about trade credit use. First, firms with higher markups supply...

We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and Karadi,...