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

Matias Braun () and Borja Larrain
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Borja Larrain: Harvard University

Finance from EconWPA

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.

Keywords: Credit Channel; Financial Development; Asset Hardness (search for similar items in EconPapers)
JEL-codes: E3 G0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-mac and nep-mfd
Date: Written 2004-03-10
Note: Type of Document - pdf; pages: 41
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http://129.3.20.41/eps/fin/papers/0403/0403001.pdf (application/pdf)

Related works:
Journal Article: Finance and the Business Cycle: International, Inter-Industry Evidence (2005)
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