Do Credit Market Shocks affect the Real Economy? Quasi-Experimental Evidence from the Great Recession and ‘Normal’ Economic Times

Michael Greenstone, Alexandre Mas and Hoai-Luu Nguyen

No 20704, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the effect of the reduction in credit supply that followed the 2008 financial crisis on the real economy. We predict county lending shocks using variation in pre-crisis bank market shares and estimated bank supply-shifts. Counties with negative predicted shocks experienced declines in small business loan originations, indicating that it is costly for these businesses to find new lenders. Using confidential microdata from the Longitudinal Business Database, we find that the 2007-2009 lending shocks accounted for statistically significant, but economically small, declines in both small firm and overall employment. Predicted lending shocks affected lending but not employment from 1997-2007.

JEL-codes: D22 D53 G01 G1 G21 J01 J23 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-ban
Note: CF EFG LS ME
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Citations: View citations in EconPapers (120)

Published as Michael Greenstone & Alexandre Mas & Hoai-Luu Nguyen, 2020. "Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and “Normal” Economic Times," American Economic Journal: Economic Policy, vol 12(1), pages 200-225.

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Related works:
Journal Article: Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and "Normal" Economic Times (2020)
Working Paper: Do Credit Market Shocks affect the Real Economy? Quasi-Experimental Evidence from the Great Recession and "Normal" Economic Times (2014)
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