Financial Integration through Production Networks

Chakraborty, I and Chityala, S and Javadekar, A and Ramcharan, R (2022) Financial Integration through Production Networks. Working Paper. SSRN.

Full text not available from this repository. (Request a copy)


This paper studies how interconnected plants distribute additional liquidity from banks through the supply chain. Using a spatially segmented bank branch expansion rule in India, we find that direct exposure to additional bank credit allows plants to hold less precautionary cash and increase bank debt. Directly exposed plants pass through liquidity to customer plants as short-term trade credit. This liquidity spillover improves sales, employment, and productivity at customer plants. Structural estimation yields an average credit multiplier of 1.48. Our results underscore the credit multiplier effects of production networks and the importance of financial integration among firms with limited banking services.

Item Type: Monograph (Working Paper)
Subjects: Finance
Date Deposited: 03 Aug 2023 17:05
Last Modified: 03 Aug 2023 17:05

Actions (login required)

View Item
View Item