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Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms

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  • Andrew Benito

    (Banco de España)

Abstract

This paper examines the adjustment of inventories by firms in the UK and Spain. A widely-held view—but one which has not found much support in previous studies of inventories— is that a key channel for monetary policy is through influencing inventory accumulation. Using a large company-level panel dataset for both countries, significant effects associated with borrowing costs on inventories are estimated. Financial effects associated with liquidity and the borrowing ratio are estimated to be weaker in Spain than in the UK. Since the Spanish financial system is more clearly bank-based, this is interpreted as contrary to the ‘bank-dependence hypothesis’.

Suggested Citation

  • Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Working Papers 0226, Banco de España.
    • Handle: RePEc:bde:wpaper:0226
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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/02/Fic/dt0226e.pdf
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    References listed on IDEAS

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    Cited by:

    1. Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Working Papers 0310, Banco de España.

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    More about this item

    Keywords

    Inventories; financial pressure; business cycles;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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