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A comment on "The Effects of Banking Competition on Growth and Financial Stability"

Andrea Calef, Sya In Chzhen, Marco Mandas and Fabio Motoki

No 81, I4R Discussion Paper Series from The Institute for Replication (I4R)

Abstract: Carlson et al. (2022) examine the causal impact of banking competition by investigating a unique circumstance in the National Banking Era of the nineteenth century in the US, where a discontinuity in bank capital requirements occurred. On the one hand, their findings suggest that banks operating in markets with fewer barriers to entry tend to increase their lending activities, promoting real economic growth. On the other hand, banks in less restricted markets also exhibit a higher propensity for risk-taking, posing risks to financial stability. First, we fully reproduce the paper's outcomes apart from a minor discrepancy in the estimate of Table 9 attributed to issues in the provided codes. Second, we test the robustness of the results by (i) changing the ranges used to select the sample of cities included in the analysis, (ii) adopting different options to address outliers' potential issues and (iii) introducing additional control variables. We observe that the estimation results remain mostly consistent when subjecting them to various robustness checks. However, it is worth highlighting that the results can be partially influenced by the criteria used to select the sample of cities and the inclusion of control variables.

Date: 2024, Revised 2024
New Economics Papers: this item is included in nep-ban, nep-com and nep-fdg
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