Credit Market Conditions and Mental Health

Abstract: Research offers conflicting predictions about the impact of credit conditions on mental health. We first assess how bank regulatory reforms that improved credit conditions, e.g., by enhancing the efficiency of credit allocation and lowering lending rates, impacted mental health. We discover that among low-income individuals, these regulatory reforms reduced mental depression, boosted labor market outcomes, eased access to mortgage debt, and reduced the ranks of the “unbanked.” We also find that mergers of large regional banks that led to branch closures and tighter credit constraints in affected counties harmed the mental health of lower-income individuals in treated counties.

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