From Housing Bust to Credit Crunch: Evidence from Small Business Loans

Haifang Huang () and Eric Stephens

No 2011-15, Working Papers from University of Alberta, Department of Economics

Abstract: This paper provides evidence that the recent housing bust in the United States precipitated a “credit crunch” for small businesses. Using detailed records of individual bank’s lending history, we develop a measure of their exposure to the housing bust. This measure is then used to estimate the impact of a drop in house prices on the supply of loans. Specifically, we compare the lending behavior of banks in the same metropolitan areas, and find that those that originated more of their mortgage loans in depressed housing markets elsewhere reduced local small business lending more substantially. We find the effect to be greater for banks with more than $10bn in assets. Overall, our estimates suggest that the fall in house prices accounted for one third of the decline in small business loans originated by major banks from 2007 to 2009.

Keywords: credit crunch; small business; housing bust (search for similar items in EconPapers)
JEL-codes: E32 E44 E51 G01 G21 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-10-01, Revised 2015-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: From housing bust to credit crunch: Evidence from small business loans (2015)
Journal Article: From housing bust to credit crunch: Evidence from small business loans (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2011_015

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