AbstractThis paper analyses the eects of bank lending on GDP and employment. Following losses on international nancial markets in 2008/09, a large German bank cut its lending to the German economy. I exploit variation in dependence on this bank across counties. To address the correlation between county GDP growth and dependence on this bank, I use the distance to the closest of three temporary, historic bank head oces as instrumental variable. The results show that the eects of the lending cut were persistent…
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