The Regulatory Effect: Did Regulatory Change Slow Credit Growth after the Great Depression and Great Recession?
49 Pages Posted: 19 Jun 2019
Date Written: June 19, 2019
Both the Great Depression and the Great Recession followed systemic banking crises and preceded unusually weak and slow recoveries. The prior literature has identified monetary, household demand, and credit effects as contributors to the severe and prolonged downturns. This paper studies a regulatory effect. In 1933-35 and 2010, Congress enacted far-reaching regulatory reforms that imposed substantial compliance costs on commercial and investment banks and some of their borrowers. I ask whether increases in regulation-related costs reduced bank lending in the aftermath of both financial crises and discuss potential policy responses.
Keywords: Regulation, Great Depression, financial crises
JEL Classification: E32, G28, K23
Suggested Citation: Suggested Citation