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Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and 'Normal' Economic Times

Do Credit Market Shocks Affect the Real Economy? Quasi-experimental Evidence from the Great Recession and 'Normal' Economic Times

Authors :
Alexandre Mas
Michael Greenstone
Hoai-Luu Q. Nguyen
Source :
American Economic Journal: Economic Policy. 12:200-225
Publication Year :
2020
Publisher :
American Economic Association, 2020.

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. (JEL E32, E44, E52, G21, G32, L25)

Details

ISSN :
1945774X and 19457731
Volume :
12
Database :
OpenAIRE
Journal :
American Economic Journal: Economic Policy
Accession number :
edsair.doi.dedup.....07c8d08cc654b5a66f4d0ee979171454
Full Text :
https://doi.org/10.1257/pol.20160005