(2020). The views expressed herein are those of the authors and do not necessarily reflect the views of the Bank of England or its Committees or the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w27418.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Trade credit is an important source of finance for firms and has been well researched, but the focus has been on financial tradeoffs. In this paper we consider the tradeoffs with inventories and develop a simple model that recognises the incentives a firm faces to offer and receive trade credit. Our model identifies the response of accounts payable and accounts receivable to changes in the cost of inventories, profitability, risk and liquidity, and importantly, this influence operates through a production channel. Our results support the model and complement many existing studies focused on explaining the financial terms of trade credit.JEL classification: G31, G32

No abstract

Official interest rate changes should influence short rates on money market instruments and retail products, such as deposit accounts and mortgages, but complete pass-through is often taken for granted. This paper provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual UK financial institutions. The methodology allows for asymmetries and non-linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived 'gap' between retail and base rates is widening or narrowing.

(2020). The views expressed herein are those of the authors and do not necessarily reflect the views of the Bank of England or its Committees or the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w27418.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.