The employment consequences of SMEs' credit constraints in the wake of the Great Recession

This article takes advantage of access to confidential matched bank-firm data relative to the Belgian economy to investigate how employment decisions of small- and medium-sized enterprises (SMEs) have been affected by credit constraints in the wake of the Great Recession. Variability in banks' financial health is used as an exogenous determinant of firms' access to credit. Estimates suggest that SMEs borrowing money from pre-crisis less healthy banks were significantly more likely to be affected by a credit constraint and, in turn, to adjust their labour input downwards than pre-crisis clients... Mehr ...