Jon S. Cohen

Department of Economics
University of Toronto
Max Gluskin House
150 St. George Street, 322
Toronto, Ontario M5S 3G7
Tel: 416-978-4181
Fax: 416-978-6713

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Toronto

NBER Working Papers and Publications

December 2016Relationship Lending and the Great Depression
with Kinda Cheryl Hachem, Gary Richardson: w22891
The collapse of long-term lending relationships amplified the Great Depression. We demonstrate this by developing a new measure of lending relationships that can be calculated from widely available data at any level of aggregation. Our approach exploits differences in the responsiveness of loan rates to bank funding costs and is supported by historical evidence and theoretical arguments. The new measure reveals that the marginal impact of bank suspensions on economic activity was higher in more relationship-intensive areas, providing the first formal evidence that relationship lending propagated the real effects of banking sector distress in the early 1930s.

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