Finance and the business cycle: international, inter-industry evidence

Matías Braun*, Borja Larrain

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

231 Scopus citations


By considering yearly production growth rates for several manufacturing industries in more than 100 countries during (roughly) the last 40 years, we show that industries that are more dependent on external finance are hit harder during recessions. The observed difference in the behavior of industries is larger when financial frictions are thought to be more prevalent, linking the result directly to the financial mechanism hypothesis. In particular, more dependent industries are more strongly affected in recessions when they are located in countries with poor financial contractibility, and when their assets are softer or less protective of financiers.

Original languageEnglish
Pages (from-to)1097-1128
Number of pages32
JournalJournal of Finance
Issue number3
StatePublished - Jun 2005
Externally publishedYes


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