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Employment in the Great Recession : How Important Were Household Credit Supply Shocks?

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  • Daniel Garcia

Abstract

I pool data from all large multimarket lenders in the U.S. to estimate how many of the over seven million jobs lost in the Great Recession can be explained by reductions in the supply of mortgage credit. I construct a mortgage credit supply instrument at the county level, the weighted average (by prerecession mortgage market shares) of liquidity-driven lender shocks during the recession. The reduction in mortgage supply explains about 15 percent of the employment decline. The job losses are concentrated in construction and finance.

Suggested Citation

  • Daniel Garcia, 2018. "Employment in the Great Recession : How Important Were Household Credit Supply Shocks?," Finance and Economics Discussion Series 2018-074, Board of Governors of the Federal Reserve System (US).
  • Handle: RePEc:fip:fedgfe:2018-74
    DOI: 10.17016/FEDS.2018.074
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    File URL: https://www.federalreserve.gov/econres/feds/files/2018074pap.pdf
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    More about this item

    Keywords

    Great Recession ; Credit supply ; Employment;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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