TY  - JOUR
AU  - Gertler, Mark
AU  - Gilchrist, Simon
TI  - What Happened: Financial Factors in the Great Recession
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 24746
PY  - 2018
Y2  - June 2018
DO  - 10.3386/w24746
UR  - http://www.nber.org/papers/w24746
L1  - http://www.nber.org/papers/w24746.pdf
N1  - Author contact info:
Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu

Simon Gilchrist
Department of Economics
New York University
19 West 4th Street.
New York, NY, 10003
Tel: 212 992 9770
Fax: NA
E-Mail: sg40@nyu.edu
AB  - Since the onset of the Great Recession, an explosion of both theoretical and empirical research has investigated how the financial crisis emerged and how it was transmitted to the real sector. The goal of this paper is to describe what we have learned from this new research and how it can be used to understand what happened during the Great Recession. In the process, we also present some new evidence on the role of the household balance sheet channel versus the disruption of banking. We examine a panel of quarterly state level data on house prices, mortgage debt and employment along with a measure of banking distress. Then exploiting both panel data and time series methods, we analyze the contribution of the house price decline versus the banking distress indicator to the overall decline in employment during the Great Recession. We confirm a common finding in the literature that the household balance sheet channel is important for regional variation in employment. However, we also find that the disruption in banking was central to the overall employment contraction
ER  -