The Credit Crunch and Fall in Employment During the Great Recession

Posted: 9 Jul 2021

See all articles by Samuel Haltenhof

Samuel Haltenhof

affiliation not provided to SSRN

Seung Jung Lee

affiliation not provided to SSRN

Viktors Stebunovs

Board of Governors of the Federal Reserve System

Date Written: February, 2014

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.

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 (February, 2014). FEDS Working Paper No. 2014-6, Available at SSRN: https://ssrn.com/abstract=3876993

Samuel Haltenhof (Contact Author)

affiliation not provided to SSRN

No Address Available

Seung Jung Lee

affiliation not provided to SSRN

No Address Available

Viktors Stebunovs

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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