A Model of Supply Chain Finance

Arbeitspapier

This article develops a model in which an intermediary uses a supply chain finance (SCF) program to fund suppliers. The SCF program pools liquidity from suppliers and meanwhile provides immediate payment to suppliers with pressing liquidity needs. We show that the intermediary optimally selects not only suppliers with positive profitability but also suppliers with negative profitability who, however, contribute to the liquidity pool. Inserting the model to an otherwise standard monetary framework, we show that with higher nominal interest rates, the SCF program emphasizes the liquidity contribution more and the profitability contribution less. Deviating from the Friedman rule, where only suppliers with positive profitability are selected, may lead to welfare gains.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10778

Classification and Topics

• Classification: Wirtschaft ; Demand for Money ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Money Supply; Credit; Money Multipliers ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• Subject: supply chain finance ; liquidity pooling ; liquidity cross-subsidization ; money search ; intermediary

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hu, Bo ; Watanabe, Makoto ; Zhang, Jun
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/282466
• Last update: 10.03.2025, 11:45 AM CET