Monetary Transmission and Inventory: Evidence from Japanese Balance‐Sheet Data by Firm Size

Kazuo Ogawa

The Japanese Economic Review, 2002, vol. 53, issue 4, 425-443

Abstract: I analyse the response of inventories and short‐term debts to monetary policy using disaggregated data on Japanese manufacturing firms classified by firm size. I find that monetary contraction decreases the inventories of large firms; however, inventories of small and medium firms increase considerably for the first several quarters. This implies that in a subcontracting system small and medium subcontractors serve as a buffer and alleviate the monetary shocks felt by their large parent firms. Moreover, inventory build‐ups are financed by increases in accounts payable. I also find that for small firms land asset is important in easing credit conditions and increasing inventories. JEL Classification Numbers: E22, E32, E44, E51.

Date: 2002
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