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The credit crunch and fall in employment during the Great Recession

Author

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  • Haltenhof, Samuel
  • Jung Lee, Seung
  • Stebunovs, Viktors

Abstract

We study how a bank credit crunch—a dramatic worsening of firm and consumer access to bank credit, such as the one observed over the Great Recession—translates into job losses in U.S. manufacturing industries. To identify the impact of the recent credit crunch, we rely on differences in the degree of dependence on external finance and of tangibility of assets across manufacturing industries and in the sensitivity of these industries׳ output to changes in the supply of consumer credit. We find that, for employment, household access to bank loans matters more than firm access to bank loans. In addition, we show that, over the recent financial crisis, tightening access to commercial and industrial loans and, in particular, consumer installment loans may have contributed significantly to the drop in employment in the manufacturing sector.

Suggested Citation

  • Haltenhof, Samuel & Jung Lee, Seung & Stebunovs, Viktors, 2014. "The credit crunch and fall in employment during the Great Recession," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 31-57.
  • Handle: RePEc:eee:dyncon:v:43:y:2014:i:c:p:31-57
    DOI: 10.1016/j.jedc.2014.03.013
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    Citations

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    Cited by:

    1. Emin M. Dinlersoz & Henry R. Hyatt & Hubert P. Janicki, 2015. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Working Papers 15-08r, Center for Economic Studies, U.S. Census Bureau.
    2. repec:cen:wpaper:15-08 is not listed on IDEAS
    3. Branch, William A. & Petrosky-Nadeau, Nicolas & Rocheteau, Guillaume, 2016. "Financial frictions, the housing market, and unemployment," Journal of Economic Theory, Elsevier, vol. 164(C), pages 101-135.
    4. Dirk Bezemer & Maria Grydaki & Lu Zhang, 2016. "More Mortgages, Lower Growth?," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 652-674, January.
    5. Lee, Seung Jung & Stebunovs, Viktors, 2016. "Bank capital pressures, loan substitutability, and nonfinancial employment," Journal of Economics and Business, Elsevier, vol. 83(C), pages 44-69.
    6. Bacchetta, Philippe & Merrouche, Ouarda, 2015. "Countercyclical Foreign Currency Borrowing: Eurozone Firms in 2007-2009," CEPR Discussion Papers 10927, C.E.P.R. Discussion Papers.
    7. Beck, Thorsten & Colciago, Andrea & Pfajfar, Damjan, 2014. "The role of financial intermediaries in monetary policy transmission," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 1-11.
    8. Marco Guerrazzi, 2015. "Animal spirits, investment and unemployment: An old Keynesian view of the Great Recession," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 16(3), pages 343-358.
    9. Fabio Berton & Sauro Mocetti & Andrea F. Presbitero & Matteo Richiardi, 2017. "Banks, Firms, and Jobs," Mo.Fi.R. Working Papers 136, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    10. Ralf R. Meisenzahl, 2016. "Can Financing Constraints Explain the Evolution of the Firm Size Distribution?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(2), pages 123-147, March.
    11. Bassett, William F. & Lee, Seung Jung & Spiller, Thomas Popeck, 2015. "Estimating changes in supervisory standards and their economic effects," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 21-43.
    12. repec:oup:rcorpf:v:4:y:2015:i:2:p:155-205. is not listed on IDEAS

    More about this item

    Keywords

    Bank credit; Credit crunch; Job losses; Great Recession; Senior Loan Officer Opinion Survey;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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