Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession

46 Pages Posted: 24 Jan 2007  

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)

Date Written: November 1992

Abstract

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.

Suggested Citation

Kashyap, Anil K. and Lamont, Owen A. and Stein, Jeremy C., Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession (November 1992). NBER Working Paper No. w4211. Available at SSRN: https://ssrn.com/abstract=480214

Anil K. Kashyap (Contact Author)

University of Chicago, Booth School of Business ( email )

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Owen A. Lamont

Harvard University - Department of Economics ( email )

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Jeremy C. Stein

Harvard University - Department of Economics ( email )

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