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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Public Policy Discussion Papers ; No. 04-6

Classification and Topics

• Classification: Wirtschaft ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Business Fluctuations; Cycles
• Subject: financial development ; financial constraints ; volatility ; Industrielle Produktion ; Volatilität ; Finanzmarkt ; Finanzsektor ; Vergleich ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Larrain, Borja
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Boston
• (where): Boston, MA
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/23452
• Last update: 10.03.2025, 11:43 AM CET