Bank heterogeneity and capital allocation: evidence from \\"fracking\\" shocks

Matthew Plosser

No 693, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper empirically investigates banks? ability to reallocate capital. I use unconventional energy development to identify unsolicited deposit inflows and then I estimate how banks allocate these deposits over the recent business cycle. To condition on credit demand, I compare banks? allocations within affected areas over time and in the cross section. When conditions deteriorate, liquid asset allocations increase and loan allocations decrease. Banks with fewer funding sources and higher capital ratios reduce loan allocations more than nearby peers. My results suggest that during adverse times, precautionary liquidity and risk aversion can impede capital reallocation by banks, even in a developed economy.

Keywords: financial intermediation; banks; business cycles (search for similar items in EconPapers)
JEL-codes: E32 G21 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-ban and nep-mac
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Citations: View citations in EconPapers (15)

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