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Finance and the Business Cycle: International, Inter-industry Evidence

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Author Info
Matias Braun (UCLA Anderson School of Management)
Borja Larrain (Harvard University)

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Abstract

By considering yearly production growth rates for several manufacturing industries in more than one hundred countries during (roughly) the last forty years, we show that industries that are more dependent on external finance are hit harder during recessions. The observed difference in the behavior of industries is larger when financial frictions are thought to be more prevalent, linking the result more directly to the financial mechanism hypothesis. In particular, more dependent industries are more strongly affected in recessions when located in countries with poor financial contractibility, and when their assets are softer or less protective of financiers.

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Paper provided by EconWPA in its series Finance with number 0403001.

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Length: 41 pages
Date of creation: 10 Mar 2004
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Handle: RePEc:wpa:wuwpfi:0403001

Note: Type of Document - pdf; pages: 41
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Web page: http://129.3.20.41

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Related research
Keywords: Credit Channel; Financial Development; Asset Hardness;

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
G0 - Financial Economics - - General

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References listed on IDEAS
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  26. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February. [Downloadable!] (restricted)
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