A Large Scale Network Analysis of Firm Trade Credit

This research project proposes a large-scale simulation of how distress and growth propagate through the real economy via a network of trade credit between firms.

While trade credit is only a subcomponent of all firm transactions, it is the life-blood of industrial production and an important buffer in firm operations when banks or markets fail to provide credit. The stresses on this important conduit during bank or market failure are extremely important to the real side of the economy. This project maps, models, and simulates an extensive firm supply chain and trade credit network using a stock-flow consistent agent-based micro-macro model, underpinned by firm-level balance sheet data. The tools developed under this research will aid bank monitoring and stress testing of their clients as well as expand the imagination and options for policy makers to construct and regulate the corporate credit system.