Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms

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ID: 290362
1994
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Abstract
We analyze the response of small versus large manufacturing firms to monetary policy. The goal is to obtain evidence on the importance of financial propagation mechanisms for aggregate activity. We find that small firms account for a significantly disproportionate share of the manufacturing decline that follows tightening of monetary policy. They play a surprisingly prominent role in the slowdown of inventory demand. Large firms initially borrow to accumulate inventories. After a brief period, small firms quickly shed inventories. We attempt to sort financial from nonfinancial explanations with evidence on asymmetries and on balance sheet effects on inventory demand across size classes.
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openalex_W2176723585 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Mark Gertler, Simon Gilchrist
Journal the quarterly journal of economics
Year 1994
DOI
10.2307/2118465
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