{'fraction_non_alphanumeric': 0.02266666666666667, 'fraction_numerical': 0.0, 'mean_word_length': 5.258333333333334, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Trade Credit, Bank Credit and Formation of Supply Chains: Can Banks Amplify Contagion Risk?

I develop a simple contract-theoretic model of multi-stage economies to address the nexus between trade credit, bank credit and balance-sheet contagion. First, I show that competitive markets in which heterogeneous price-taker firms compete strategically by setting trade credit settlements have a unique symmetric equilibrium, which dictates the production flow along the chains. Second, I reconcile the conflicting evidence on the role of credit chains either as shock absorber or shock amplifier with a testable condition. I use the condition to argue that the rationing used by banks (richer borrowers obtain larger loans) may worsen the chains quality.