Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ?, Vol. 1 of 1

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Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ?

Author:	Raddatz, Claudio;	Collection Title:	Policy Research working paper ; no. WPS 4525
Country:	World;	Date Stored:	2008/02/21
Document Date:	2008/02/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS4525	SubTopics:	Bankruptcy and Resolution of Financial Distress; Access to Finance; Economic Theory & Research; ; Investment and Investment Climate
Volume No:	1 of 1

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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