Banking Market Structure, Liquidity Needs, and Industrial Growth Volatility

Ho-Chuan Huang () and Stephen Miller

No 1206, Working Papers from University of Nevada, Las Vegas , Department of Economics

Abstract: While the existing literature acknowledges the effect of banking structure on industrial growth as well as the effect of financial development on industrial growth and its volatility, we examine whether banking structure, given bank (financial) development, exerts any nontrivial effect on industrial growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the variance of real value added per firm growth. Finally a variety of sensitivity checks show that our findings remain for different model specifications, banking market structure measures, liquidity needs indicators, and omitted variables.

Keywords: Bank Concentration; External Liquidity; Bank Development; Industrial Growth Volatility. (search for similar items in EconPapers)
JEL-codes: E32 G2 O16 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-12
New Economics Papers: this item is included in nep-ban and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Banking Market Structure, Liquidity Needs, and Industrial Growth Volatility (2012)
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