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,
no. 1, February 2020
(pp. 200-225)
Abstract
Using comprehensive data on bank lending and establishment-level outcomes from 1997–2010, this paper finds that small business lending is an unimportant determinant of small business and overall economic activity. A shift-share style research design is implemented to predict county-level lending shocks using variation in preexisting bank market shares and bank supply shifts. Counties with negative predicted lending shocks experienced declines in small business loan originations, indicating that it is costly to switch lenders. However, small business loan originations have an economically insignificant and generally statistically insignificant impact on both small firm and overall employment during the Great Recession and normal times.Citation
Greenstone, Michael, Alexandre Mas, and 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, 12 (1): 200-225. DOI: 10.1257/pol.20160005Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L25 Firm Performance: Size, Diversification, and Scope
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