Friday 26 October 2018 13:00 - 14:30

SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

This study examines the role of financing constraints in propagation of an unexpected supply shock through a country's production network. The analysis, motivated by a simple theoretical model, is based on data covering quasi-totality of supplier-customer links in Turkey during the 2010-14 period. The shock in question was the increase of the tax rate applying to imports purchased on credit from 3% to 6% of the transaction value, which took place in October 2011. As utilization of trade credit varied across product varieties, the shock had a heterogenous effect across importers. The results suggest that the shock had a substantial direct effect on importers. More interestingly, the findings suggest that it was propagated and amplified primarily by firms with limited access to external liquidity. Liquidity constrained importers, exposed to the shock, transmitted it to their customers to a much larger extent than importers that were not facing liquidity constraints.

Participants are expected to adhere to the CEP Events Code of Conduct.

Directions

This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

Urban and Regional Economics Seminars are part of the CEP's Urban and spatial programme.