Bank Integration and Business Volatility

Donald Morgan, Bertrand Rime and Philip E. Strahan

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: We investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations across states. Starting with a two-state version of the unit banking model in Holmstrom and Tirole (1997), we conclude that the theoretical effect of integration on business fluctuations is ambiguous because integration dampens the impact of bank capital shocks but amplifies the impact of firm collateral shocks. The net effect empirically seems stabilizing, however, as we find fluctuations in employment growth within states falls as integration rises, especially when we instrument for the level of integration and control for employment composition within states. Integration also weakens the link between bank capital growth within states and growth in state employment and bank lending.

Date: 2001-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://fic.wharton.upenn.edu/fic/papers/02/0210.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://fic.wharton.upenn.edu/fic/papers/02/0210.pdf [301 Moved Permanently]--> https://wifpr.wharton.upenn.edu/fic/papers/02/0210.pdf)

Related works:
Working Paper: Bank integration and business volatility (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wop:pennin:02-10

Access Statistics for this paper

More papers in Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().