The Credit Crunch and Fall in Employment During the Great Recession

62 Pages Posted: 10 Apr 2014

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: March 31, 2014

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.

Keywords: Bank credit, credit crunch, job losses, Great Recession, Senior Loan Officer Opinion Survey

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

Suggested Citation

Haltenhof, Samuel and Lee, Seung Jung and Stebunovs, Viktors, The Credit Crunch and Fall in Employment During the Great Recession (March 31, 2014). FEDS Working Paper No. 201406. Available at SSRN: https://ssrn.com/abstract=2422897 or http://dx.doi.org/10.2139/ssrn.2422897

Samuel Haltenhof

University of Michigan at Ann Arbor - Department of Economics

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

Seung Jung Lee (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Viktors Stebunovs

Board of Governors of the Federal Reserve System ( email )

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

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