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

Author

Listed:
  • Matias Braun

    (UCLA Anderson School of Management)

  • Borja Larrain

    (Harvard University)

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.

Suggested Citation

  • Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance 0403001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0403001
    Note: Type of Document - pdf; pages: 41
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit Channel; Financial Development; Asset Hardness;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G0 - Financial Economics - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

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