Trade Supply Research Articles

Bargaining equilibrium in a two-echelon supply chain with a capital-constrained retailer

We investigate the bargaining equilibrium in a two-echelon supply chain consisting of a supplier and a capital-constrained retailer. The newsvendor-like retailer can borrow from a bank or use the supplier's trade credit to fund his business. In the presence of bankruptcy risk for both the supplier and retailer, with a wholesale price contract, we model the player's strategic interactions under the Nash and Rubinstein bargaining games. In both financing schemes, the Nash bargaining game overcomes the double marginalization effect under the Stackelberg game and achieves supply chain coordination. The Rubinstein bargaining game realizes the Pareto improvement of the supply chain. The player with stronger bargaining power always prefers to initially offer a contract under the Rubinstein bargaining game to obtain greater expected profit. Furthermore, we characterize the conditions under which bargaining power and discount factor affect the bargaining equilibrium. We numerically verify our theoretical results.

Chinese culture, materialism and corporate supply of trade credit

PurposeThe purpose of this paper is to investigate how cultural value in materialism affects corporate supply of trade credits.Design/methodology/approachUsing a sample of 14,710 firm-year observations of Chinese listed firms from 1998 to 2012, the authors examine the influence of regional materialism on accounts receivable.FindingsThe authors find that listed firms within more materialistic tend to extend less trade credit to their customers, in particular in long-term categories of trade credit. Such negative effects can be significantly mitigated by state control, suggesting the effects are more pronounced in privately controlled listed firms. The negative effects of materialism still hold after controlling for other regional factors, such as trust, GDP per capita or institutional development.Research limitations/implicationsThe authors show materialism as a cultural construct varies across Chinese regions, and it could have important impact on corporate supply of trade credits, besides the previous found effects on consumer use of credit.Originality/valueThis paper expands the literature about the influence of materialism on economic decision making from the individual level to the corporate level.

Empirical Analysis of Monetary and Fiscal Policies and Balance of Trade Dynamics in Nigeria (1981- 2017)

This paper empirically investigated the relationships among money supply, government revenue, government expenditure, domestic debt, external debt, inflation rate, exchange rate and balance of trade in Nigeria based on time series data which spanned between 1981 and 2017. The data were sourced from Central Bank of Nigeria Statistical Bulletin publications of various issues and National Bureau of Statistics. The data were tested for stationarity using Augumented Dickey Fuller unit root test and Phillips-Perron unit root test while the co-integration test was conducted using Johansen’s methodology. Ordinary Least Square (OLS) estimating technique was used for the empirical analysis. The findings revealed that both the explanatory variables and the dependent variable have long run equilibrium relationship. The results further demonstrated that government revenue (GREV), government expenditure (GEXP), exchange rate (EXGR) and inflation rate (INFR) have statistically significant positive relationships with balance of trade (BOT) while money supply (MS), domestic debt (DDEBT) and external debt (EDEBT) exert statistically significant negative impact on balance of trade (BOT) in Nigeria. Based on the results, government at all levels should ensure implementation of monetary and fiscal policies’ instruments aimed at promoting favorable investment atmosphere through appropriate stabilization of interest rates, exchange rates and inflation rates in order to galvanize economic growth, economic stability, economic sustainability and favorable balance of trade; there should be promotion of exportation of Nigerian products by the government especially non-oil products in order to bring more foreign exchange earning into the country, boost productive activities and improve the balance of trade position of the country. In addition, government should ensure that loans borrowed from domestic and external sources are judiciously expended on productive activities in order to positively influence balance of trade; and there should be imposition of ban on importation of products that can be manufactured domestically so as to expand productive capacity of indigenous industries and ensure favorable balance of trade. Finally, different tiers of government should invest massively on critical infrastructure in the economy to boost local investment in productive activities, thus galvanizing balance of trade. Keywords: Monetary Policy, Fiscal Policy, Balance of Trade, Unit Root Test, Co-integration Test, Ordinary Least Squares, Nigeria DOI : 10.7176/JPID/50-07 Publication date :June 30 th 2019

Impact of Fiscal Deficit and Government Debt on Interest Rate in Pakistan

The current study was conducted in the year 2014 in Pakistan to investigate the impact of fiscal deficit and government debt on the interest rate. Data on selected macroeconomic variables like fiscal deficit, government debt, GDP per capita, money supply and volume of trade etc. from the year 1990 to 2012. The study also has tried to find out that how the interest rate in the country is affected by the government debt and fiscal deficit. Augmented Dickey-Fuller test was run to address the stationary issue in the data, and then Ordinary Least Square (OLS) model test was run to check the relationship among the variables. Two models were set in the study. In the first model, the relationship of GDP per capita, money supply, total debt servicing and volume of trade showed a significant relationship with the fiscal deficit, while in the second model the relationship of inflation, fiscal deficit, money supply, government debt and public debt showed a significant relationship with the interest rate. Policy makers are advised to focus on the increase of DGP/Capita and export volume. In order to sustain the rate of inflation, the government may regulate the money supply and public borrowing.

Investor sentiment, market competition and trade credit supply

PurposeThe purpose of this paper is to study the influence of investor sentiment on the supply of trade credit, and further explores the difference of the effect of investor sentiment on the supply of trade credit in the environment of strong market competition and weak market competition.Design/methodology/approachThe authors use panel estimation techniques to examine the impact of investor sentiment in the Chinese securities market on the supply of corporate trade credit.FindingsThis paper finds that investor sentiment has positive impact on trade credit through three channels of motivation, willingness and ability. At the same time, this paper finds that investor sentiment has stronger impact on enterprises in strong market competition than enterprises in weak market competition.Research limitations/implicationsThis paper expands the research on the influence of virtual economy on the real economy, analyzes the difference of the influence of investor sentiment on the supply of trade credit under different market competition conditions.Practical implicationsThe paper perfects the mechanism of trade credit decision-making at this stage, and provides more evidence for the virtual economy to act on the real economy.Social implicationsThis paper provides a theoretical basis for the government functional departments to use the investor sentiment to play a positive role in trade credit to improve the market competition and guide the development of China’s capital market in the direction of rationalization and health.Originality/valueIn combination with market competition environment and industry characteristics, this paper investigates external irrational factors and studies how investor sentiment affects trade credit supply.

A Survey on Using Blockchain in Trade Supply Chain Solutions

Blockchain has emerged as a promising technology to ensure trust between parties. By using this technology, we can establish a secure communication paradigm, where data integrity and immutability can be guaranteed. These inherited features underline blockchain as a suitable technology to optimise the adopted processing model in several domains, such as health, trade supply chain and food safety. In this paper, we present a detailed overview of the use of blockchain technology in (international) trade supply chains. Furthermore, the discussed proposals have been classified based on the target application scenarios. Our goal is to clarify the benefits of applying this technology to the trading domain and highlight the challenges that are associated with applying this technology to optimise the trading domain. Accordingly, we underline several issues that occur during the designing of the blockchain solution to optimise the (international) trade supply chain.

Network Centrality of Customers and Suppliers

We construct network centrality measures for customer and supplier industries in the U.S. economy. Consistent with Ahern, et al. (2014), we find central suppliers have higher levels of systematic risk than central customers and therefore more exposed to sectoral shocks. We posit that central suppliers have incentives to channel funds to their customers via trade credit. Our empirical results are consistent with such a view. We find that the cash to cashflow sensitivity and value of cash is significantly higher for central suppliers than non-central firms, even among those financially unconstrained. In contrast, central customers have no cash to cash flow sensitivity, consistent with supplier trade credit redistribution helping to relieve customers’ financial constraints. Using the 2008 financial crisis as an exogenous shock, we document that central suppliers with high pre-crisis liquidity decrease their investment, while only customers without central suppliers are sensitive to the crisis. Similarly, only customers without central suppliers are sensitive in their payable days to the crisis.

From transit hub to major supplier of illicit cigarettes to Argentina and Brazil: the changing role of domestic production and transnational tobacco companies in Paraguay between 1960 and 2003

BackgroundParaguay has reportedly been a major transit hub for illicit tobacco products since the 1960s, initially to supply markets in Argentina and Brazil and, more recently, other regional markets and beyond. However, to date there has been no systematic analysis, notably independent of the tobacco industry, of this trade including the roles of domestic production and transnational tobacco companies (TTCs). This article fills that gap by detailing the history of Paraguay’s illicit cigarette trade to Brazil and Argentina of TTC products and Paraguayan production between 1960 and 2003. The effective control of illicit cigarette flows, under Article 15 of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) and the Protocol to Eliminate the Illicit Trade in Tobacco Products, requires fuller understanding of the changing nature of the illicit trade.MethodsWe systematically searched internal industry documents to understand the activities and strategies of leading TTCs in Paraguay and subregion over time. We also mapped illicit trade volume and patterns using US government and UN data on the cigarette trade involving Paraguay. We then estimated Paraguay’s cigarette production from 1989 to 2003 using tobacco leaf flows from the United Nations Commodity Trade Statistics Database (UN Comtrade).ResultsWe identify four phases in the illicit tobacco trade involving Paraguay: 1) Paraguay as a transit hub to smuggle BAT and PMI cigarettes from the U.S. into Argentina and Brazil (from the 1960s to the mid-1970s); 2) BAT and PMI competing in north-east Argentina (1989–1994); 3) BAT and PMI competing in southern and southern-east Brazil (mid to late 1990s); and 4) the growth in the illicit trade of Paraguayan manufactured cigarettes (from the mid- 1990s onwards). These phases suggest the illicit trade was seeded by TTCs, and that the system of supply and demand on lower priced brands they developed in the 1990s created a business opportunity for manufacturing in Paraguay. Brazil’s efforts to fight this trade, with a 150% tax on exports to Latin American countries in 1999, further prompted supply of the illicit trade to shift from TTCs to Paraguayan manufacturers.ConclusionThis paper extends evidence of the longstanding complicity of TTCs in the illicit trade to this region and the consequent growth of Paraguayan production in the 1990s. Our findings confirm the need to better understand the factors influencing how the illicit tobacco trade has changed over time, in specific regional contexts, and amid tobacco industry globalization. In Paraguay, the changing roles of TTC and domestic production have been central to shifting patterns of illicit supply and distribution since the 1960s. Important questions are raised, in turn, about TTCs efforts to participate as legitimate partners in global efforts to combat the problem, including a leading role in data gathering and analysis.

A Study on the Effect of Environmental Uncertainty on Trade Dependence and Supply Chain Integration

A Study on the Effect of Environmental Uncertainty on Trade Dependence and Supply Chain Integration

Financing preferences and performance for an emission-dependent supply chain: Supplier vs. bank

Many small and middle-sized enterprises (SMEs) with capital constraints have two primary short-term financing modes: internal financing (supplier) and external financing (bank). We consider an emission-dependent supply chain with one supplier and one emission-dependent manufacturer that are capital-constrained and in need of short-term financing. We investigate the financing preferences of the supply chain from a competitive bank or supplier when demand is uncertain and consumers have low-carbon preferences. Under the cap-and-trade system, we show that the existence of investments in carbon abatement will have no impact on the selection of financing mode. We find that the supplier's trade credit financing serves as a unique financing equilibrium for manufacturers regardless of whether investments in carbon abatement are considered. Irrespective of the chosen financing equilibrium, if a manufacturer chooses to invest in carbon abatement, the dominant supplier will offer a wholesale price to prompt the manufacturer to choose the largest feasible carbon emission reduction and maximize his profit. In addition, we present a set of numerical analyses to compare the results of different financing modes and the financing equilibrium with and without carbon abatement, and we analyze the impacts of key parameters on the performance of supply chain members.

Embodied energy consumption of the construction industry and its international trade using multi-regional input–output analysis

International trade supplies a great number of new opportunities for the development of the construction industry in relation to globalisation. Many construction industry studies relevant to international trade have focused on the evaluation of national trade performance in energy from the viewpoint of the whole economy or of a specific product. Intermediate demand and input, as significant components of the input–output table, indicate the interrelationships between economic sectors, as well as the economic structure in relation to aspects of production and consumption. The purpose of this paper is to analyse the international trade in construction products and services with a focus on their embodied energy consumed at the intermediate level. A multi-regional input–output method is adopted to assess the transfer of embodied energy that accompanies the international trade of the global construction industries. The net embodied energy in the construction industry of each world region has been identified based on its exports and imports. The results indicate that the average embodied energy consumption in intermediate demand over 1999–2009 accounted for approximately 90% in the world construction industries. International construction industries were dominated by activities of intermediate production which aimed to satisfy the embodied energy consumption in the intermediate and final requirements. The USA, China, Japan, Spain and India were the top five in the scale of the intermediate consumption of embodied energy. The production of intermediate goods and services in some world regions decreased its dependence on embodied energy imports from the international construction industries. This study highlights the influence of the international trade in embodied energy on the development of the construction industry at the intermediate level. The outcomes provide considerable resources and references for policy adjustment and strategy design in the management of international trade for the construction sector.

Problemy finansowe kontrahenta jako bariera rozwoju nowo powstałego przedsiębiorstwa – ujęcie branżowe uwarunkowań rynkowych w Polsce

The aim of the study is to analyze the significance of the financial problems of the customer against other market barriers limiting the establishment and development of enterprises in Poland in the years 2005–2014 taking into account the industry. The paper argues that the financial problems of the customers are a significant barrier of newly established companies, particularly in industries where the focus is on the offering of goods and services to individual customers. For individuals, the financial situation is a determinant of demand. In industries where B2B co-operation is largely carried out, there are opportunities to support the creation of stocks by obtaining capital from suppliers (trade credit) or other sources of financing. The financial problems of the contractor in these industries do not constitute a significant barrier to the functioning and development of newly established companies. The panel data from the years 2003–2014, was taken from the Central Statistical Office (GUS) report “Creation and operation conditions, development prospects of Polish enterprises established”.

Co-patent, financing constraints, and innovation in SMEs: An empirical analysis using market value panel data of listed firms

Abstract We have studied how small and medium-sized firms (SME) can overcome the liability of smallness ( Clegg et al., 1996 ; Thorgren et al., 2012 ) and obtain value from co-patents. We examined the relationship between the co-ownership of the patent and the firm's market value, along with the moderating role of government subsidies and upstream supplier's trade credit. The study finds that co-patent intensity is negatively correlated with the SME's market value. Further, supplier financing mitigates the negative relationship between the co-patent intensity and the market value of SMEs while the government subsidies strengthen the negative relationship between the co-patent intensity and the market value of SMEs. The results above imply that because the patent needs to be shared among the partners, this raises capital market' perception of the SME's commercial uncertainty and has a negative impact on the market value of SMEs. However, like general patent in which it signals the strength of SMEs in R&D, co-patent also reduces the external market's perception of an SME's technological uncertainty. The SME thus attracts more external funding. These findings provide us a more comprehensive understanding of the motivation of SMEs in co-patenting and how SMEs overcome the liability of smallness in capturing value from the co-patent.

Information flow in the Sino-Brazilian beef trade

Considering the opportunities offered by the Chinese beef market and the fragilities in the Sino-Brazilian beef trade supply chain, this study aims to identify the main sources and channels used by Brazilian beef packers to obtain information on the Chinese market. The results reveal that the Brazilian beef packers and institutions within the export sector have little knowledge regarding the Chinese market. Neither the size nor the export experience of the beef packing firms and the foreign direct investment seem to significantly influence the quality of the knowledge they hold on the Chinese beef market. The sector has neither an integrated database containing the essential information on the Chinese market nor a unified traceability system in place that could facilitate the information flow among the agents within the beef supply chain. Consequently, firms need to dedicate substantial management resources (time, financial and human) to collect information from various sources.

Scenario approach in forecasting the efficiency of infrastructure projects for transport supply of international trade

In the current conditions for the development of the world economic system and against the backdrop of growing contradictions of various participants in trade and economic relations formed under the influence of both purely economic and political factors, when making investment decisions for the development of international business and projects, including infrastructure ones, it is necessary to take into account associated risks. Using the methodological approaches of system analysis of large-scale investment projects, which use expert methods to reduce the level of influence of risk factors and uncertainty, an analysis of the sensitivity of individual infrastructure projects to the influence of environmental factors was carried out. As a result of the study, it was shown that scenarios for the development of the external environment differently affect the infrastructure projects of different purposes that are allocated in the work. Each type of infrastructure projects has its own peculiarities: projects of transit value serve the trade and economic relations of European and Asian countries, infrastructure projects of regional importance contribute to strengthening trade and economic relations of border areas, and certain commercial railway lines provide access to mineral deposits. The findings can be used in forecasting the development of continental trade and economic relations, both in general and in individual industries, as well as in substantiating large-scale infrastructure projects that solve the problem of transport supply of international trade.

Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data

Using supplier-level trade data, we estimate the effect on consumer welfare from changes in U.S. imports both in the aggregate and for different household income groups from 1998 to 2014. To do this, we use consumer preferences which feature non-homotheticity both within sectors and across sectors. After structurally estimating the parameters of the model, using the universe of U.S. goods imports, we construct import price indexes in which a variety is defined as a foreign establishment producing an HS10 product that is exported to the United States. We find that lower income households experienced the most import price inflation, while higher income households experienced the least import price inflation during our time period. Thus, we do not find evidence that the consumption channel has mitigated the distributional effects of trade that have occurred through the nominal income channel in the United States over the past two decades.

On the emergence of oscillations in distributed resource allocation

We consider the problem of resource allocation in a decentralised market where users and suppliers trade for a single commodity. Due to the lack of strict concavity, convergence to the optimal solution by means of classical gradient type dynamics for the prices and demands, is not guaranteed. In the paper we explicitly characterise in this case the asymptotic behaviour of trajectories and provide an exact characterisation of the limiting oscillatory solutions. Methods of modifying the dynamics are also given, such that convergence to an optimal solution is guaranteed, without requiring additional information exchange among the users.

Building an Effective Criminal Justice Response to Wildlife Trafficking: Experiences from the ASEAN Region

South East Asia and more specifically the Association of South East Asian Nations (ASEAN) region plays a crucial role in the supply chain of the illegal wildlife trade as a transit, destination and also origin of endangered species. The capacity of ASEAN members to respond to wildlife crimes as a cohesive region rather than a conglomeration of nations is hampered by marked differences in the way in which each country frames the problem, designs laws and enforces them. Corruption undermines the implementation of the Convention on International Trade in Endangered Species in every step of the wildlife trade supply chain. The regional response from criminal justice systems so far remains weak and the use of international tools like the United Nations Convention on Transnational Organized Crime is critical for an improvement of the status quo. This article examines the existing policy frameworks and provides some recommendations to address the most urgent shortcomings, with a focus on improved criminal justice responses in the ASEAN region.

What determines China's crude oil importing trade patterns? Empirical evidences from 55 countries between 1992 and 2015

This study develops a conceptual framework that synthesizes the supply, demand, price, and openness of crude oil trade, along with a list of traditional economic, political, and geographical factors to investigate the determinants of crude oil imports in emerging markets. We test the framework using China's crude oil imports from 55 countries for the period from 1992 to 2015. Using both static and dynamic panel data models, we find that China's crude oil import is associated with exporting country's supply, demand, and price as well as its bilateral trade relationships. These factors were found to affect China's import of crude oil from the Middle East. However, only bilateral trade relationships affect its imports of crude oil from the Asia-Pacific. Furthermore, we do not find substantial evidence in this research to indicate that China's direct investment increases crude oil imports from those countries.This article is part of a Virtual Special Issue entitled 'Comparing Sustainable Energy Policies in Northeast Asia: toward the harmonized Public-Private Partnership'.

A Dea-Logistics Performance Index

Logistics and transport increasingly play a pivotal role in international trade relations. The Logistics Performance Index (LPI) measures the on-the-ground efficiency of trade supply chains or logistics performance. The aim of this paper is to propose a data envelopment analysis (DEA) approach to compute a synthetic index of overall logistics performance (DEA-LPI) and benchmark the logistics performance of the countries with LPI. Dealing with the six dimensions of LPI, the proposed approach uses DEA as a tool for multiple criteria decision making (MCDM). Furthermore, the paper also analyses the potential differences observed when using different variables, namely income and geographical area. Our findings suggest that the logistics performance depends largely on income and geographical area. High income countries are in the group of best performers, which is highly dominated by the EU.