This paper explores a financial role of Japanese general trading companies (GTCs), which act as a central point in a distribution network among group firms. I examine Meltzer’s conjecture, which holds that financially strong companies like GTCs increase trade receivables and reduce trade payables to shield their trading partners from a monetary squeeze. First, I investigate the trade credit gra...

We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on ethanol markets using a multimarket international ethanol model. We find that U.S. trade barriers have been effective in protecting the ethanol industry. Under current policy, there is separability of the U.S. ethanol market from world markets. With trade liberalization, the ethanol marke...

The classical economic order quantity model of Wilson’s was developed with the assumption that the buyer must pay off immediately on arrival of the goods in the inventory system. In fact, offering buyers to delays payment for goods received is considered as a sales promotional tool in the business world. With offer of trade credit, vendor increases sales, attracts more buyers and reduces on – h...

In today’s competitivemarkets, most firms in United Kingdom and United States offer their products on trade credit to stimulate sales and reduce inventory. Trade credit is calculated based on time value of money on the purchase cost (i.e., discounted cash flow analysis). Recently, many researchers use discounted cash flow analysis only on the purchase cost but not on the revenue (which is signi...

This paper explores the substitution relationship between trade credit and bank credit, and its countercyclic dynamic pattern through economic cycles. We propose a new theoretical model, using a mechanism design method, which predicts the substitution between the two credits and its counter-cyclic behavior, subject to the condition of technological efficiency not less than one. This model also ...

This paper provides a unified analysis for the onset of the 1998 financial crisis and the strong economic recovery afterward in Russia and other former Soviet Union countries. Before the crisis a banking failure arose owing to the coexistence of a lemons credit market and high government borrowing. In a lemons credit market low credit risk firms switched from bank to nonbank finance, including ...

In practice, a credit-worthy retailer frequently receives a permissible delay on the entire purchase amount without collateral deposits from his/her supplier (i.e., an up-stream full trade credit). By contrast, a retailer usually requests his/her credit-risk customers to pay a fraction of the purchase amount at the time of placing an order, and then grants a permissible delay on the remaining b...