Financial Crises, Financial Dependence, and Industry Growth
The authors investigate the link between financial crises and industry growth. They analyze data from 19 industrial and developing countries that have experienced financial crises during the past 30 years to investigate how financial crises affect...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2002/06/1943366/financial-crises-financial-dependence-industry-growth http://hdl.handle.net/10986/14285 |
| Summary: | The authors investigate the link between
financial crises and industry growth. They analyze data from
19 industrial and developing countries that have experienced
financial crises during the past 30 years to investigate how
financial crises affect sectors dependent on external
sources of finance. Specifically, the authors examine
whether the impact of a financial crisis on externally
dependent sectors varies with the depth of the financial
system. They find that sectors highly dependent on external
finance tend to experience a greater contraction of value
added during a crisis in deeper financial systems than in
countries with shallower financial systems. They hypothesize
that the deepening of the financial system allows sectors
dependent on external finance to obtain relatively more
external funding in normal periods, so a crisis in such
countries would have a disproportionately negative effect on
externally dependent sectors. In contrast, since externally
dependent firms tend to obtain relatively less external
financing in shallower financial systems (and hence have
relatively lower growth rates in such countries during
normal times), a crisis in such countries has less of a
disproportionately negative effect on the growth of
externally dependent sectors. |
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