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A Comparison of the United States and Canadian Banking Systems in the Twentieth Century: Stability vs. Efficiency?

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  • Michael D. Bordo
  • Hugh Rockoff
  • Angela Redish

Abstract

This paper asks whether the vaunted comparative stability of the Canadian banking system has been purchased at the cost of creating an oligopoly. We assembled a data set that compares bank failures, lending rates, interest paid on deposits and related variables over the period 1920 to 1980. Our principal findings are that: (1) interest rates paid on deposits were generally higher in Canada; (2) interest income received on securities was generally slightly higher in Canada; (3) interest rates charged on loans were generally quite similar; (4) net rates of return to equity were generally higher in Canada than in the U.S..

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4546.

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Date of creation: Nov 1993
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Publication status: published as "The U.S. Banking System from a Northern Exposure: Stability vs. Efficiency ." Journal of Economic History, Vol 54 (June 1994): 325-341.
Handle: RePEc:nbr:nberwo:4546

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  1. Haubrich, Joseph G., 1990. "Nonmonetary effects of financial crises : Lessons from the great depression in Canada," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 223-252, March.
  2. Duca, John V., 1992. "US business credit sources, demand deposits, and the 'missing money'," Journal of Banking & Finance, Elsevier, vol. 16(3), pages 567-583, June.
  3. Gerald P. O'Driscoll, Jr., 1988. "Deposit Insurance in Theory and Practice," Cato Journal, Cato Journal, Cato Institute, vol. 7(3), pages 661-681, Winter.
  4. James, John A., 1976. "The Development of the National Money Market, 1893-1911," The Journal of Economic History, Cambridge University Press, vol. 36(04), pages 878-897, December.
  5. Howard Bodenhorn & Hugh Rockoff, 1992. "Regional Interest Rates in Antebellum America," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 159-187 National Bureau of Economic Research, Inc.
  6. Shaffer, Sherrill & DiSalvo, James, 1994. "Conduct in a banking duopoly," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1063-1082, December.
  7. Sherrill Shaffer, 1990. "A test of competition in Canadian banking," Working Papers 90-18, Federal Reserve Bank of Philadelphia.
  8. Patrick I. Mahoney, 1988. "The recent behavior of demand deposits," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 195-208.
  9. John H. Boyd & Stanley L. Graham, 1991. "Investigating the banking consolidation trend," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-15.
  10. R. Alton Gilbert, 1977. "Effects of interest on demand deposits: implications of compensating balances," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 8-15.
  11. Alli Nathan & Edwin H. Neave, 1989. "Competition and Contestability in Canada's Financial System: Empirical Results," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 576-94, August.
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Cited by:
  1. Bordo, Michael, 1995. "Regulation and bank stability: Canada and the United States, 1870-1980," Policy Research Working Paper Series 1532, The World Bank.
  2. Carolyn Currie, 2005. "Towards a General Theory of Financial Regulation: Predicting, Measuring and Preventing Financial Crises," Working Paper Series 142, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  3. David C. Wheelock, 2003. "Commentary on The real effects of U.S. banking deregulation," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 129-134.
  4. Beck, Thorsten, 2008. "Bank competition and financial stability : friends or foes ?," Policy Research Working Paper Series 4656, The World Bank.
  5. Philipp Hartmann & Elena Carletti, 2002. "Competition and Stability: What's Special about Banking?," FMG Special Papers sp140, Financial Markets Group.
  6. C├ęcile Carpentier & Jean-Marc Suret, 2003. "The Canadian and American Financial Systems: Competition and Regulation," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 431-447, December.
  7. Elmas Yaldiz & Flavio Bazzana, 2010. "The effect of market power on bank risk taking in Turkey," Financial Theory and Practice, Institute of Public Finance, vol. 34(3), pages 297-314.

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