Economic Brief

October 2010, No. 10-10

The Responses of Small and Large Firms to Tight Credit Shocks: The Case of 2008 through the Lens of Gertler and Gilchrist (1994)

Marianna Kudlyak, David A. Price and Juan M. Sanchez

Do large firms and small firms behave differently when credit becomes more costly or harder to obtain? Past research has found that small firms are more likely to be credit-constrained and thus tend to be affected more negatively than large firms during such times. Recent findings from the 2007-2009 recession, however, raise questions about the roles of small and large firms during periods of tight credit.

Additional Resources

Chari, V. V., Lawrence J. Christiano, and Patrick J. Kehoe, "The Gertler-Gilchrist Evidence on Small and Large Firm Sales," Manuscript, January 2007.

Gertler, Mark, and Simon Gilchrist, "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," Quarterly Journal of Economics, May 1994, vol. 109, no. 2, pp. 309-340. (Article available online with subscription.)

Moscarini, Giuseppe, and Fabien Postel-Vinay, "The Timing of Labor Market Expansions: New Facts and a New Hypothesis" in NBER Macroeconomics Annual 2008, eds. Daron Acemoglu, Kenneth Rogoff, and Michael Woodford, pp. 1-52, Chicago: University of Chicago Press, 2009.

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