Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ?
AbstractThis paper provides evidence of the presence and relevance of a credit-chain amplification mechanism by looking at its implications for the correlation of industries. In particular, it tests the hypothesis that an increase in the use of trade-credit along the input-output chain linking two industries results in an increase in their correlation. The analysis uses detailed data on the correlations and input-output relations of 378 manufacturing industry-pairs across 44 countries with different degrees of use of trade credit. The results provide strong support for this hypothesis and indicate that the mechanism is quantitatively relevant.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4525.
Date of creation: 01 Feb 2008
Date of revision:
Economic Theory&Research; Access to Finance; Bankruptcy and Resolution of Financial Distress; Investment and Investment Climate;
Other versions of this item:
- Claudio Raddatz, 2010. "Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks?," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 985-1003, November.
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