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Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession

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  • Anil K. Kashyap
  • Owen A. Lamont
  • Jeremy C. Stein

Abstract

This paper examines micro data on U.S. firms' inventories during different macroeconomic episodes. Much of the analysis focuses on the 1981-82 recession, a recession that was apparently precipitated by tight monetary policy. We find important cross-sectional effects in this period: firms that were "bank-dependent" were much more prone to shed inventories than their non-bank-dependent counterparts. In contrast, such cross-sectional differences are largely absent during a period of "loose" monetary policy later in the 1980s. Our findings are consistent with the view that 1) there is a bank lending channel of monetary policy transmission; 2) the lending channel is likely to be particularly important in explaining inventory fluctuations during downturns.

Suggested Citation

  • Anil K. Kashyap & Owen A. Lamont & Jeremy C. Stein, 1992. "Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession," NBER Working Papers 4211, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4211
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    2. Willi Semmler, 2011. "Asset Prices, Booms and Recessions," Springer Books, Springer, number 978-3-642-20680-1, December.
    3. Kawaguchi, Masami & Makino, Kyoko & Kato, Tadaya, 1997. "Viscous fingering patterns of silica suspensions in polymer solutions: effects of viscoelasticity and gravity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 385-398.

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