Financial Crises, Financial Dependence, and Industry Growth

27 Pages Posted: 14 Aug 2002

See all articles by Luc Laeven

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Randall Kroszner

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Daniela Klingebiel

World Bank - Policy Unit

Date Written: June 2002

Abstract

Laeven, Klingebiel, and Kroszner investigate the link between financial crises and industry growth. They analyze data from 19 industrial and developing countries that have experienced financial crises during the past 30 years to investigate how financial crises affect sectors dependent on external sources of finance. Specifically, the authors examine whether the impact of a financial crisis on externally dependent sectors varies with the depth of the financial system. They find that sectors highly dependent on external finance tend to experience a greater contraction of value added during a crisis in deeper financial systems than in countries with shallower financial systems. They hypothesize that the deepening of the financial system allows sectors dependent on external finance to obtain relatively more external funding in normal periods, so a crisis in such countries would have a disproportionately negative effect on externally dependent sectors. In contrast, since externally dependent firms tend to obtain relatively less external financing in shallower financial systems (and hence have relatively lower growth rates in such countries during normal times), a crisis in such countries has less of a disproportionately negative effect on the growth of externally dependent sectors.

This paper - a product of the Financial Sector Strategy and Policy Department - is part of a larger effort in the department to study the link between financial development and economic growth. The authors may be contacted at llaeven@worldbank.org, dklingebiel@worldbank.org, or randy.kroszner@gsb.uchicago.edu.

JEL Classification: G20, G28, G30, G38

Suggested Citation

Laeven, Luc A. and Kroszner, Randall and Klingebiel, Daniela, Financial Crises, Financial Dependence, and Industry Growth (June 2002). Available at SSRN: https://ssrn.com/abstract=320142

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Randall Kroszner

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8779 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daniela Klingebiel

World Bank - Policy Unit ( email )

1818 H Street NW
Room MC 9-903
Washington, DC 20433
United States
202-473-7470 (Phone)
202-522-2031 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
462
Abstract Views
2,391
rank
68,459
PlumX Metrics