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Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ?

Claudio Raddatz

No 4525, Policy Research Working Paper Series from The World Bank

Abstract: This paper provides evidence of the presence and relevance of a credit-chain amplification mechanism by looking at its implications for the correlation of industries. In particular, it tests the hypothesis that an increase in the use of trade-credit along the input-output chain linking two industries results in an increase in their correlation. The analysis uses detailed data on the correlations and input-output relations of 378 manufacturing industry-pairs across 44 countries with different degrees of use of trade credit. The results provide strong support for this hypothesis and indicate that the mechanism is quantitatively relevant.

Keywords: Economic Theory&Research; Access to Finance; Bankruptcy and Resolution of Financial Distress; Investment and Investment Climate (search for similar items in EconPapers)
Date: 2008-02-01
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Journal Article: Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks? (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:4525

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