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

By Michael Greenstone, Alexandre Mas, Hoai-Luu Q. Nguyen. American Economic Journal: Economic Policy, 2020

299 citations recorded by the source corpus.

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)

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/8b038b65f9ba247be1b443e69c526b82f7d62eab

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Citations in the corpus

Credit Allocation Under Economic Stimulus: Evidence from China (2019, background): “See, for example, the discussions in Greenstone, Mas, and Nguyen (2015) and Chodorow-Reich (2014).”
Are Credit Markets Still Local? Evidence from Bank Branch Closings (2019, background): “(Carlino and Kerr 2015), and access to services (Card 1995; Rossin-Slater 2013; Avdic (2016); Handbury, Rahkovsky, and Schnell 2017).”
Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis (2018, background): “evidence of wage effects comes from Kaboski and Townsend (2012) who, using a natural experiment, find that increased credit access due to the Million Baht Program in Thailand increased wages.”
Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut (2016, unknown): “Over the period there were shocks to housing (Mian and Sufi 2012), manufacturing (Charles, Hurst, and Notowidigdo 2016), and credit (Chodorow-Reich 2014; Greenstone, Mas, and Nguyen 2014).”
Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy (2020, background): “Other studies have shown that a sudden reduction of credit availability also may affects borrowers’ employment decisions (Chodorow-Reich 2014; Greenstone et al. 2014).”
Quasi-Experimental Shift-Share Research Designs (2018, background): “…and recent examples of shift-share IVs, spanning many settings and topics, include Luttmer (2006), Card (2009), Saiz (2010), Kovak (2013), Nakamura and Steinsson (2014), Oberfield and Raval (2014), Greenstone et al. (2014), Diamond (2016), Suárez and Zidar (2016), and Hornbeck and Moretti (2018).”
Shift-Share Designs: Theory and Inference* (2018, background): “Furthermore, recent papers have explored versions of shift-share strategies to estimate the effect on firms of shocks to outsourcing costs and foreign demand (Hummels et al., 2014; Aghion et al., 2018).2 Our paper is related to two other papers studying the statistical properties of shift-share inst”
How Much Do Idiosyncratic Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data (2017, unknown): “4 It is also possible to show that Chava and Purnanandam (2011) and Greenstone and Mas (2012) can be nested in this framework. how much do idiosyncratic bank shocks affect investment?”