Finance and Economics Discussion Series (FEDS)

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November 2018

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

Daniel García

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.
Accessible materials (.zip)

Keywords: Great Recession, credit supply, employment

DOI: https://doi.org/10.17016/FEDS.2018.074

PDF: Full Paper

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Last Update: January 09, 2020