NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Shahe Emran

Initiative for Policy Dialogue
Columbia University
New York, NY
USA

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Initiative for Policy Dialogue

NBER Working Papers and Publications

January 2020Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh
with Dilip Mookherjee, Forhad Shilpi, M. Helal Uddin: w26615
We extend standard models of price pass-through in an imperfectly competitive supply chain to incorporate rationing of trade credit. Credit rationing reverses predictions concerning effects of raw material import prices on pass-through to wholesale prices, and effects of regulations of intermediaries. To test these we study the effects of a policy in Bangladesh's edible oils supply chain during 2011-12 banning a layer of financing intermediaries. Evidence from a difference-in-difference estimation rejects the standard model. We find that the regulatory effort to reduce market power of financing intermediaries ended up raising consumer prices by restricting access to credit of downstream traders.
 
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