Credit Market Conditions and Mental Health

Research offers conflicting predictions about the impact of credit conditions on mental health. We first assess how bank regulatory reforms that improved credit conditions, for example, 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. This paper was accepted by Kay Giesecke, finance. Funding: C. Lin and M. Tai acknowledge financial support from the National Natural Science Foundation of China [Grant 72192841] and the Research Grants Council of the Hong Kong Special Administration Region, China [Project T35/710/20R]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00194 .