Firms' Financial and Real Responses to Monetary Tightening: Evidence for Large and Small Italian Companies
Fabio Schiantarelli () and
Alessandro Sembenelli ()
Additional contact information
Brian Sack: Board of Governors of the Federal Reserve System, Division of Monetary Affairs, Washington, DC
Giornale degli Economisti, 1998, vol. 57, issue 1, pages 35-64
Following the idea that adverse macroeconomic shocks to the economy worsen agency problems between borrowers and lenders, this paper presents empirical evidence that small and large firms react differently to monetary tightening. We use aggregate annual balance sheet data for two subsamples of large and small private Italian companies over the period 1968-1991. Based upon qualitative and quantitative descriptive evidence, we first construct stringency dummies that capture periods of monetary tightness. We then provide descriptive evidence that, following a restriction, small firms report a sharper decrease in short-term dept and a steeper fall in both sales and inventory. Finally, inventory and fixed investment equations are estimated in an ECM form. Consistently with our expectations, we find that both inventory and fixed investment decisions by small firms display greater sensitivity to proxies of credit worthiness, the more so during periods of monetary tightening.
Keywords: monetary tightening; asymmetric information; investment (search for similar items in EconPapers)
JEL-codes: E22 E44 G32 (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (10) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:gde:journl:gde_v57_n1_p35-64
Ordering information: This journal article can be ordered from
Access Statistics for this article
Giornale degli Economisti is currently edited by April
More articles in Giornale degli Economisti from GDE (Giornale degli Economisti e Annali di Economia), Bocconi University via Sarfatti, 25 - 20136 Milano (Italy).
Series data maintained by Erika Somma (). This e-mail address is bad, please contact .