Bank Lending Channels During the Great Recession

43 Pages Posted: 3 Nov 2013

See all articles by Samuel Haltenhof

Samuel Haltenhof

University of Michigan at Ann Arbor - Department of Economics

Seung Jung Lee

Board of Governors of the Federal Reserve System

Viktors Stebunovs

Board of Governors of the Federal Reserve System

Date Written: October 15, 2013

Abstract

We study the existence and economic significance of bank lending channels that affect employment in U.S. manufacturing industries. In particular, we address the question of how 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 these industries. To identify these channels, we rely on differences in the degree of external finance dependence and of asset tangibility across manufacturing industries and in the sensitivity of these industries’ output to changes in the supply of consumer credit. We show that household access to bank loans matters more for employment than firm access to local bank loans. Our results suggest that, over the recent financial crisis, tightening access to commercial and industrial loans and consumer installment loans explains jointly about a quarter of the drop in employment in the manufacturing sector. In addition, a decrease in the availability of home equity loans explains an extra one-tenth of the drop.

Keywords: bank credit channels, bank lending standards, home equity extraction, credit crunch, employment, job losses, Great Recession

JEL Classification: G21, G28, G30, J20, L25

Suggested Citation

Haltenhof, Samuel and Lee, Seung Jung and Stebunovs, Viktors, Bank Lending Channels During the Great Recession (October 15, 2013). Available at SSRN: https://ssrn.com/abstract=2346952 or http://dx.doi.org/10.2139/ssrn.2346952

Samuel Haltenhof

University of Michigan at Ann Arbor - Department of Economics

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Seung Jung Lee

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Viktors Stebunovs (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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