Resource title

Financial Development, Financial Constraints, and the Volatility of Industrial Output

Resource image

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Resource description

More financially developed countries show lower volatility of industrial output. Volatility is particularly reduced in industries that are more financially dependent. Most of the reduction is in idiosyncratic volatility. Systematic volatility is reduced less strongly, implying that industries are more closely correlated with GDP in more financially developed countries. At the firm level, short-term debt is negatively correlated with output as financial development increases, suggesting that debt is used in a countercyclical way to stabilize production. The results indicate that financial development relaxes financial constraints mainly to smooth negative cashflow shocks.

Resource author

Borja Larrain

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23452

Resource license

Adapt according to the presented license agreement and reference the original author.