Opschoor, D., Dijk, D.V. and Franses, P.H. (2025). Heterogeneity in Manufacturing Growth Risk Journal of Money, Credit and Banking.

We analyze differences in output growth risk with respect to financial conditions across U.S. manufacturing industries. Using a multilevel quantile regression approach, we find that industries exhibit heterogeneous increases of downside risk in times of tight financial conditions, while upside potential remains stable. This heterogeneity is particularly pronounced between the more vulnerable durable goods sector and the more resilient nondurable goods sector, highlighting that the stronger cyclical sensitivity of durable manufacturers is primarily driven by downside risks. Moreover, we show that industry characteristics significantly explain these differences. Large industries or industries with a large share of variable costs relative to fixed costs are more vulnerable to adverse financial conditions. This suggests that industry characteristics that are typically associated with greater cyclical sensitivity are in fact more accurately associated with greater downside risks.