search query: @author Perotti, E. C. / total: 4
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| Author: | Perotti, E. C. |
| Title: | Inertial credit and opportunistic arrears in transition |
| Journal: | European Economic Review
1998 : NOV, VOL. 42:9, p. 1703-1725 |
| Index terms: | TRADE CREDIT FINANCE COMPANIES NATIONALISATION EASTERN EUROPE |
| Language: | eng |
| Abstract: | In a transition economy, enterprise restructuring may exhibit a Laffer-curve response to tighter credit as a result of rational collective inertia. In the presence of a rigid production structure, unenforceable contracts and high adjustment costs, a contraction in credit finance subtracts more liquidity than enterprises can generate internally. Because unrestructured firms are forced to extend trade credit to illiquid buyers, an increase in their number increases the availability of forced supplier credit, in turn increasing the attractiveness of inertial behaviour. As trade credit cannot be enforced, a critical mass of trade and wage arrears causes pressure for a collective bailout. |
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