From housing bust to credit crunch: Evidence from small business loans

Haifang Huang and Eric Stephens

Canadian Journal of Economics, 2015, vol. 48, issue 3, 853-880

Abstract: This paper provides evidence that the 20072009 housing bust in the United States precipitated a credit crunch for small businesses. To remove demand-driven correlations, we rely on within-city comparisons. We ask whether banks whose mortgage portfolios were more heavily weighted in harder-hit cities cut back lending to a greater extent in all cities where they make small business loans, relative to other banks in those cities. The evidence is consistent with a credit crunch. Large banks reacted with heavier cuts, but consistent evidence is also found among smaller banks. Quantitatively, the detected contribution to the overall decline in lending from the crunch appears modest.

JEL-codes: E44 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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