Housing Bust, Bank Lending & Employment : Evidence from Multimarket Banks
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 e?ects, as counties whose banks were exposed to adverse shocks in other markets su?ered employment declines, especially in young ?rms. This ?nding 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.
File(s): File format is application/pdf https://www.federalreserve.gov/econres/feds/files/2017118pap.pdf
Part of Series: Finance and Economics Discussion Series
Publication Date: 2017-12-01
Pages: 47 pages