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Consumption risk sharing over the business cycle: The role of small firms' access to credit markets


Hoffmann, Mathias; Shcherbakova, Iryna (2011). Consumption risk sharing over the business cycle: The role of small firms' access to credit markets. The Review of Economics and Statistics, 93(4):1403-1416.

Abstract

Consumption risk sharing among U.S. states increases in booms and decreases in recessions. These business cycle fluctuations in interstate risk sharing are driven mainly by states in which small businesses account for a large share of income or employment. State-level banking deregulation during the 1980s loosened the dependence of interstate risk sharing on the business cycle, mainly through its impact on states with many small firms. Our results establish a major benefit from bank deregulation: small firms' access to credit and, with it, interstate risk sharing have improved mainly when it is most urgently needed: in nationwide economic downturns.

Abstract

Consumption risk sharing among U.S. states increases in booms and decreases in recessions. These business cycle fluctuations in interstate risk sharing are driven mainly by states in which small businesses account for a large share of income or employment. State-level banking deregulation during the 1980s loosened the dependence of interstate risk sharing on the business cycle, mainly through its impact on states with many small firms. Our results establish a major benefit from bank deregulation: small firms' access to credit and, with it, interstate risk sharing have improved mainly when it is most urgently needed: in nationwide economic downturns.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:1 November 2011
Deposited On:09 Nov 2011 10:54
Last Modified:07 Dec 2017 09:34
Publisher:MIT Press
ISSN:0034-6535
Additional Information:Copyright: MIT Press
Publisher DOI:https://doi.org/10.1162/REST_a_00123

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