Shocks, Financial Dependence, and Efficiency; Evidence From U.S. and Canadian Industries
The paper investigates how changes in industries' funding costs affect total factor productivity (TFP) growth. Based on panel regressions using 31 U.S. and Canadian industries between 1991 and 2007, and using industries' dependence on external funding as an identification mechanism, we show that increases in the cost of funds have a statistically significant and economically meaningful negative impact on TFP growth. This effect is, however, non-monotonic across sectors with different degrees of dependence on external finance. Our findings cannot be explained by either increasing returns to scale or factor hoarding, as results are not sensitive to controlling for industry size and our calculations account for changes in factor utilization. The paper presents a theoretical model that produces the observed non-monotonic effect of financial shocks on TFP growth and suggests that financial shocks distort the allocation of factors across firms even within an industry, thus reducing TFP growth.
|Date of creation:||01 Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Y. Campbell & Robert J. Shiller, 1988.
"Stock Prices, Earnings and Expected Dividends,"
Cowles Foundation Discussion Papers
858, Cowles Foundation for Research in Economics, Yale University.
- John Y. Campbell & Robert J. Shiller, 1988. "Stock Prices, Earnings and Expected Dividends," NBER Working Papers 2511, National Bureau of Economic Research, Inc.
- Campbell, John & Shiller, Robert, 1988. "Stock Prices, Earnings, and Expected Dividends," Scholarly Articles 3224293, Harvard University Department of Economics.
- Campbell, J.Y. & Shiller, R.J., 1988. "Stock Prices, Earnings And Expected Dividends," Papers 334, Princeton, Department of Economics - Econometric Research Program.
- J. Bradford De Long, 1990.
""Liquidation" Cycles: Old-Fashioned Real Business Cycle Theory and the Great Depression,"
NBER Working Papers
3546, National Bureau of Economic Research, Inc.
- J. Bradford De Long, . "`Liquidation' Cycles: Old-Fashioned Real Business Cycle Theory and the Great Depression," J. Bradford De Long's Working Papers _135, University of California at Berkeley, Economics Department.
- Pablo A. Neumeyer & Fabrizio Perri, 2001.
"Business Cycles in Emerging Economies:The Role of Interest Rates,"
01-12, New York University, Leonard N. Stern School of Business, Department of Economics.
- Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
- Pablo A. Neumeyer & Fabrizio Perri, 2004. "Business cycles in emerging economies: the role of interest rates," Staff Report 335, Federal Reserve Bank of Minneapolis.
- Pablo A. Neumeyer & Fabrizio Perri, 2004. "Business Cycles in Emerging Economies: The Role of Interest Rates," NBER Working Papers 10387, National Bureau of Economic Research, Inc.
- Neumeyer, Pablo Andrés & Perri, Fabrizio, 2004. "Business Cycles in Emerging Economies: The Role of Interest Rates," CEPR Discussion Papers 4482, C.E.P.R. Discussion Papers.
- Pablo Andres Neumeyer & Fabrizio Perri, 1999. "Business Cycles in Emerging Economies: the role of interest rates," Department of Economics Working Papers 014, Universidad Torcuato Di Tella.
- F. Arizala & E. Cavallo & A. Galindo, 2013.
"Financial development and TFP growth: cross-country and industry-level evidence,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 23(6), pages 433-448, March.
- Francisco Arizala & Eduardo Cavallo & Arturo Galindo, 2009. "Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence," Research Department Publications 4630, Inter-American Development Bank, Research Department.
- Francisco Arizala & Eduardo A. Cavallo & Arturo Galindo, 2009. "Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence," IDB Publications (Working Papers) 6771, Inter-American Development Bank.
- Timothy J. Kehoe & Edward C. Prescott (), 2007.
"Great depressions of the twentieth century,"
Federal Reserve Bank of Minneapolis, number 2007gdott.
- Timothy Kehoe & Edward Prescott, 2002.
"Data Appendix to Great Depressions of the Twentieth Century,"
kehoe02, Review of Economic Dynamics.
- Matias Braun & Borja Larrain, 2004.
"Finance and the Business Cycle: International, Inter-industry Evidence,"
- Matías Braun & Borja Larrain, 2005. "Finance and the Business Cycle: International, Inter-Industry Evidence," Journal of Finance, American Finance Association, vol. 60(3), pages 1097-1128, 06.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:11/199. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.