How Large was the Credit Crunch in the OECD?

Reduced credit supply in the years 2008 and 2009 should have resulted in lower growth in industries that are more dependent on external finance. This effect should have been stronger in countries with a more prominent and/or more leveraged financial system. We focus on the OECD countries and, controlling for omitted variables, find robust empirical support for both hypotheses. We estimate that the credit crunch reduced the industrial growth rate by 5.5 percentage points in 2008 and by 21 percentage points in 2009.