We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks’ health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare...

We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare...

Long-term unemployment reached unprecedented levels in Spain in the wake of the Great Recession and it still affects around 57% of the unemployed. We document the sources that contributed to the rise in long-term unemployment and analyze its persistence using state-of-the-art duration models. We...