(), Bertrand Rime
and Philip E. Strahan
Donald Morgan: Federal Reserve Bank of New York
Bertrand Rime: Swiss National Bank
Philip E. Strahan: Swiss National Bank
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.
35 pages, September 15, 2004
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