SIFR Research Report Series, Institute for Financial Research
Bank Integration and State Business Cycles
(), Bertrand Rime and Philip E. Strahan
Abstract: We investigate how integration of bank ownership across
states has affected economic volatility within states. In theory, bank
integration could cause higher or lower volatility, depending on whether
credit supply or credit demand shocks predominate. In fact, year-to-year
fluctuations in a state's economic growth fall as its banks become more
integrated (via holding companies) with banks in other states. As the bank
linkages between any pair of states increases, fluctuations in those two
states tend to converge. We conclude that interstate banking has made state
business cycles smaller, but more alike.
Keywords: Bank integration; Business volatility; Geographic diversification; (follow links to similar papers)
JEL-Codes: E32; E50; G21; (follow links to similar papers)
35 pages, September 15, 2004
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