TY  - JOUR
AU  - Gertler,Mark
AU  - Gilchrist,Simon
TI  - Monetary Policy, Business Cycles and the Behavior of Small Manufacturing Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3892
PY  - 1991
Y2  - November 1991
UR  - http://www.nber.org/papers/w3892
L1  - http://www.nber.org/papers/w3892.pdf
N1  - Author contact info:
Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu

Simon Gilchrist
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-6824
Fax: NA
E-Mail: sgilchri@bu.edu
M2  - featured in NBER digest on 1991-12-01
AB  - We present evidence on the cyclical behavior of small versus large manufacturing firms, and on the response of the two classes of firms to monetary policy. Our goal is to take a step toward quantifying the role of credit market imperfections in the business cycle and in the monetary transmission mechanism. We find that, following tight money, small firms sales decline at a faster pace than large firm sales for a period of more than two years. Further, bank lending to small firms contracts, while it actually rises for large firms. Monetary policy indicators tied to the performance of banking, such as M2, have relatively greater predictive power for small firms than for large. Finally, small firms are more sensitive than are large to lagged movements in GNP. Considering that small firms overall are a non-trivial component of the economy, we interpret these results as suggestive of the macroeconomic relevance of credit market imperfections.
ER  -