Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226309 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8607
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
This study finds that even small unexpected supply shocks propagate downstream through production networks and are amplified by firms with short-term financial constraints. The unexpected 2011 increase in the tax on imports purchased with foreign-sourced trade credit is examined using data capturing almost all Turkish supplier-customer links. The identification strategy exploits the heterogeneous impact of the shock on importers. The results indicate that this relatively minor, non-localized shock had a non-trivial economic impact on exposed firms and propagated downstream through affected suppliers. Additional empirical tests, motivated by a simple theory, demonstrate that low-liquidity firms amplified its transmission.
Subjects: 
production networks
shock transmission
financing constraints
liquidity
JEL: 
F14
F61
G23
L14
E23
Document Type: 
Working Paper
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