Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession
Anil K. Kashyap
University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago
Owen A. Lamont
Harvard University - Department of Economics
Jeremy C. Stein
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
NBER Working Paper No. w4211
This paper examines micro data on U.S. firms' inventories during different macroeconomic episodes. Much of the analysis focuses on the 1981-82 recession, a recession that was apparently precipitated by tight monetary policy. We find important cross-sectional effects in this period: firms that were "bank-dependent" were much more prone to shed inventories than their non-bank-dependent counterparts. In contrast, such cross-sectional differences are largely absent during a period of "loose" monetary policy later in the 1980s. Our findings are consistent with the view that 1) there is a bank lending channel of monetary policy transmission; 2) the lending channel is likely to be particularly important in explaining inventory fluctuations during downturns.
Number of Pages in PDF File: 46
Date posted: January 24, 2007
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