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Market-Based Solutions to Vital Economic Issues
Research
Dec 10, 2019

We Miss You George Bailey: The Effect of Local Banking Conditions on the County-Level Timing of the Great Recession

Abstract

Community banks are the central financial institution in many places. They have the capacity to alleviate credit constraints of small firms. This may increase economic resilience, delaying or mitigating the effects of the Great Recession. We estimate how the county-level banking access and community bank market share affect both the timing and duration of the Great Recession. Using the Cox Proportional Hazards Model, we find that communities with a higher community bank market share are either less likely to experience recession conditions, or experience these conditions later. Using the Heckman Selection model, we confirm these results, and show that communities with a higher community bank market share are less likely to experience recession conditions. This research provides the first link between local financial institutions, and economic resilience.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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