Skip to main content

Rebuilding after Disaster Strikes: How Local Lenders Aid in the Recovery


Using detailed employment data on firm age and size, I show that the presence of local finance improves job retention and creation at young and small firms. I use natural disasters and regulatory guidance to disentangle the effects of credit supply and demand. I find that an additional standard deviation of local finance offsets the negative effects of the disaster and can lead to 1 to 2% higher employment growth at either young or small firms. Banks increase lending but are not borrowing against future lending, nor do they experience changes in default rates. These findings suggest that local lenders play an important and necessary role in job creation in the economy.

Keywords: quarterly workforce indicators, natural disasters.

JEL Classication: G21, O47.


Suggested citation: Cortés, Kristle Romero , 2014. “Rebuilding after Disaster Strikes: How Local Lenders Aid in the Recovery,” Federal Reserve Bank of Cleveland, Working Paper no 14-28.

Upcoming EventsSEE ALL

  • 11.30.17

    2017 Financial Stability and Fintech Conference

    The Federal Reserve Bank of Cleveland, the Office of Financial Research, and the University of Maryland’s Robert H. Smith School of Business invite you to attend the 2017 Financial Stability and Fintech Conference on November 30–December 1, 2017, in Washington DC. This year’s conference will highlight research and facilitate discussions related to the impact of innovation on financial stability, policy, and regulation.

  • 05.17.18

    CALL FOR PAPERS

    Inflation: Drivers and Dynamics 2018. Researchers from academia and central banks exchange ideas on modeling inflation and inflation expectations and their relationship to the macroeconomy.

  • 06.25.18

    International Journal of Central Banking Conference

    CALL FOR PAPERS The International Journal of Central Banking (IJCB) is organizing its 2018 annual conference, "Ten Years after the Global Financial Crisis: What Have We Learned about Ensuring Financial Stability?" The conference will be hosted by De Nederlandsche Bank (DNB) in Amsterdam, The Netherlands, on June 25-26, 2018, and is being organized by Tobias Adrian, Harrison Hong, Luc Laeven, and Loretta Mester.