This paper studies the transmission of global shocks during the Great Recession and its impact on French employment. Particularly, we explore the role of trade credit in the propagation of cross-border shocks. Using a sub-sample of importing enterprises that were active over 2004-2009, our findings imply that strong pre-crisis sourcing ties with countries that were more resilient to the global crisis, translated into better performance in terms of employment growth over 2008-2009. This effect dramatically varies with trade credit intensity. Strongly relying on trade credit made firms more vulnerable to unanticipated shocks, for whom the adverse impact of the crisis was exacerbated. This effect intensified among firms with important sourcing ties with severely shocked countries. By contrast, the negative effect of the crisis was mitigated for trade credit intensive firms when they had stronger sourcing relations with countries subject to milder shocks.
Banque de France – European Commission
Paris School of Economics University of Paris 1 Panthéon-Sorbonne
Margarita Lopez Forero