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Housing Bust, Bank Lending & Employment: Evidence from Multimarket Banks

David P. Glancy

No 2017-118, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: I use geographic variation in bank lending to study how bank real estate losses impacted the supply of credit and employment during the Great Recession. Banks exposed to distressed housing markets cut mortgage and small business lending relative to other banks in the same county. This lending contraction had real effects, as counties whose banks were exposed to adverse shocks in other markets suffered employment declines, especially in young firms. This finding is robust to instrumenting for bank exposure to housing shocks using shocks in distant markets, exposure based on historical lending, or exposure to markets with inelastic housing supply.

Keywords: Bank lending; Employment; Financial crisis; Residential real estate (search for similar items in EconPapers)
JEL-codes: E24 E44 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
Date: 2017-12-01
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DOI: 10.17016/FEDS.2017.118

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