Trade credit linkages along the supply chain: evidence for the Italian textile sector

We examine the trade credit linkages among firms within a supply chain to reckon the effect of such linkages on the propagation of liquidity shocks from downstream to upstream firms. We choose a sample appropriate for this task, consisting of a large data set of Italian firms from the textile industry, a well known example of a comprehensive manufacturing cluster featuring a large number of small and specialized firms at each level of the supply chain. The results of the analysis indicate that the level of trade credit that firms provide to their suppliers is positively related to the level of trade credit granted to their clients: when the level of trade credit granted to clients divided by sales goes up by 1, the level of trade credit provided to suppliers divided by cost-of goods-sold goes up by an amount that varies between 0,22 and 0,52. Since all firms along the chain are linked by trade credit relationships, an increase in the level of trade credit granted by wholesalers generates a liquidity cascade throughout the chain. We designate the overall increase in the level of trade credit among all firms in the chain as a result of a unitary impulse in the level of trade credit granted by wholesalers as the multiplier effect of trade credit for the industry chain. We estimate such multiplier to vary between 1.28 and 2.04. We also investigate the effect of final demand on the level of trade credit sourced by firms at various levels of the chain and, in particular, whether such effect is amplified for firms further up in the chain as a result of liquidity propagation via trade credit linkages. We uncover evidence of such amplification when the links of liquidity transmission along the chain are individually modeled and estimated. An unitary increase in wholesalers’ sales is found to produce an effect on trade payables among firms at the top of the chain (i.e., Preparers and Spinners) that is more than twice as big as the corresponding effect among firms at the bottom of the chain (i.e., Wholesalers).

Communication system model for information rate evaluation of differential detection over time-varying channels

A communication system model for mutual information performance analysis of multiple-symbol differential M-phase shift keying over time-correlated, time-varying flat-fading communication channels is developed. This model is a finite-state Markov (FSM) equivalent channel representing the cascade of the differential encoder, FSM channel model and differential decoder. A state-space approach is used to model channel phase time correlations. The equivalent model falls in a class that facilitates the use of the forward backward algorithm, enabling the important information theoretic results to be evaluated. Using such a model, one is able to calculate mutual information for differential detection over time-varying fading channels with an essentially finite time set of correlations, including the Clarke fading channel. Using the equivalent channel, it is proved and corroborated by simulations that multiple-symbol differential detection preserves the channel information capacity when the observation interval approaches infinity.