Bank Integration and State Business Cycles / Donald Morgan, Bertrand Rime, Philip Strahan.

Format:

Book

Author/Creator:

Morgan, Donald.

Contributor:

National Bureau of Economic Research.

Rime, Bertrand.

Strahan, Philip.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9704.

NBER working paper series no. w9704

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

We investigate how the better integration of U.S. banks across states has affected economic volatility within states. In theory, the link between bank integration and volatility is ambiguous; integration tends to dampen the impact of bank capital shocks on state activity, but it amplifies the impact of firm collateral shocks. Empirically, the net effect has been stabilizing as year-to-year fluctuations in employment growth within states fall as that state's banks become better integrated (via holding companies) with banks in other states. The magnitudes are large, and the effects are most pronounced in states with relatively undiversified economies. Consistent with our model, we find the link between economic growth and bank capital within a state weakens with integration, whereas the link between growth and housing prices (a possible proxy for firm capital) tends to increase.

Notes:

Print version record

May 2003.