Browsing by Subject "Financing constraints"

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    Financial constraints and propagation of shocks in production networks
    (MIT Press, 2024-03-19) Demir, Banu; Javorcik, Beata; Michalski, Tomasz K.; Ors, Evren
    We examine the propagation of a small unexpected supply shock through a production network and the role financial constraints play in its transmission. Using data on almost all Turkish supplier-customer links, we exploit the heterogeneous impact of an unexpected import-tax increase for identification. We find that this relatively minor shock had a nontrivial economic impact on exposed firms and propagated downstream through affected suppliers. Importantly, we show that low-liquidity firms amplified its transmission.