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Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ?, Volume 1
 
Author:Raddatz, Claudio; Country:World;
Date Stored:2008/02/21Document Date:2008/02/01
Document Type:Policy Research Working PaperSubTopics:Bankruptcy and Resolution of Financial Distress; Access to Finance; Economic Theory & Research; ; Investment and Investment Climate
Language:EnglishRegion:The World Region
Report Number:WPS4525Collection Title:Policy Research working paper ; no. WPS 4525
Volume No: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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