Credit Chains and Sectoral Comovement : Does the Use of Trade Credit Amplify Sectoral Shocks?
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-credi...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/02/9025045/credit-chains-sectoral-comovemen-t-use-trade-credit-amplify-sectoral-shocks http://hdl.handle.net/10986/6414 |
| Summary: | 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. |
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