Our objective in this paper is to analyze empirically the relationship between the external finance premium of non-financial corporations in Brazil with their default probability and with their demand for inventories. As for the former relation, we find that corporations that have greater external finance premium have greater probability of default. As for the latter, we find that the external finance premium is positive and statistically significantly correlated. The results confirm previous results of the literature that indicate that the balance sheet channel of monetary policy is relevant in Brazil.
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