TITLE:
U.S. Monetary Policy, Emerging Market FDI Firms and Trade Credit
AUTHORS:
Shao Han
KEYWORDS:
U.S. Monetary Policy, FDI Firm, Credit Trade, Shadow Rate
JOURNAL NAME:
Open Journal of Business and Management,
Vol.12 No.1,
January
31,
2024
ABSTRACT: This article empirically explore a trade credit
channel through which FDI firms can spread
U.S. monetary policy shocks to the host country. Based on the firm-level
data in emerging market countries provided by Osiris, This article finds that
the U.S. monetary policy has a negative
impact on the trade credit supply of FDI companies in emerging market countries and then affects the liquidity of
local companies in the host country due to the financing advantages of FDI
companies, and this impact is more pronounced for firms with less financing
constraints and for firms whose parent companies are located in developed countries. Country heterogeneity analysis shows that the impact is greater in the host countries with more open capital
accounts, less flexibility in exchange rates and higher levels of
financial development. Further research shows that U.S. monetary policy
eventually has an influence on the financial situation of the local firms in
the host country by affecting the trade credit of FDI firms, and this channel
has a greater impact on local companies which have a smaller scale and sectors
that are highly dependent on external financing. Moreover, in this channel, the macro-prudential policies implemented by the
host country are ineffective. Only
capital controls can effectively weaken the influence, while foreign
exchange intervention will amplify this impact.