Does unconventional monetary policy improve credit support for the industry chain? The mechanism of trade credit

Abstract

The People's Bank of China established the Medium-term Lending Facility in 2014 with a framework of eligible collateral. Using this as a quasi-natural experiment, this study employs the difference-in-difference model to investigate the impact of unconventional monetary policy on enterprises' trade credit provision. The research findings are as follows: Firstly, unconventional monetary policy can significantly increase enterprises' trade credit provision, and the policy effect is achieved by lowering credit spreads of bonds. Secondly, for state-owned and manufacturing enterprises, the effect of unconventional monetary policy in promoting the increase in the trade credit provision is more pronounced. Furthermore, the effects of unconventional monetary policy on enterprises' trade credit provision are more pronounced in provinces with a higher degree of marketization, financial development, and capital misallocation.