Inventory Investment in Australia and the Global Financial Crisis

Gianni La Cava ()

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: A sharp decline in inventory investment was an important contributor to the economic slowdown in Australia in 2008/09. I identify the extent to which this was due to a tightening in short-term credit constraints. In an experimental design setting, I identify the causal effect of short-term credit constraints on inventory investment by exploiting variation in the debt maturity structure of Australian companies just prior to the global financial crisis. I show that the companies that were forced to refinance or repay a relatively large share of debt in 2008/09 reduced inventory investment by significantly more than companies that were due to refinance or repay their debt at some other time. A case study on the Australian motor vehicle industry supports the hypothesis that a decline in the availability of short-term credit significantly hampered corporate investment in inventories in 2008/09.

Keywords: inventory investment; credit supply; financial crisis (search for similar items in EconPapers)
JEL-codes: C31 C33 D92 E22 E32 E51 G32 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-mac
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