How Do Credit Supply Shocks Affect the Real Economy? Evidence from the United States in the 1980S
NBER WORKING PAPER SERIES HOW DO CREDIT SUPPLY SHOCKS AFFECT THE REAL ECONOMY? EVIDENCE FROM THE UNITED STATES IN THE 1980S Atif Mian Amir Sufi Emil Verner Working Paper 23802 http://www.nber.org/papers/w23802 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 2017 This research was supported by funding from the Washington Center for Equitable Growth, Julis Rabinowitz Center for Public Policy and Finance at Princeton, and the Initiative on Global Markets at Chicago Booth. Hongbum Lee, Oliver Giesecke, and Seongjin Park provided excellent research assistance. We thank Alan Blinder, Jesus Fernandez-Villaverde, Itay Goldstein, Philip Strahan, and seminar participants at Georgetown University, Columbia University, University College London, Imperial College, Princeton University, the University of Chicago, and the NBER Summer Institute for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2017 by Atif Mian, Amir Sufi, and Emil Verner. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. How do Credit Supply Shocks Affect the Real Economy? Evidence from the United States in the 1980s Atif Mian, Amir Sufi, and Emil Verner NBER Working Paper No. 23802 September 2017 JEL No. E3,E32,E44,E51 ABSTRACT Does an expansion in credit supply affect the economy by increasing productive capacity, or by boosting demand? We design a test to uncover which of the two channels is more dominant, and we apply it to the United States in the 1980s where the degree of banking deregulation generated differential local credit supply shocks across states.
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