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Banking Market Structure, Liquidity Needs, and Industrial Growth Volatility

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  • Ho-Chuan (River) Huang

    ()
    (Department of Banking and Finance, Tamkang University Author-Name: WenShwo Fang
    Department of Economics, Feng Chia University)

  • Stephen M. Miller

    ()
    (Department of Economics, University of Nevada, Las Vegas)

Abstract

While the existing literature acknowledges the effect of banking structure on industrial growth as well as the effect of financial development on industrial growth and its volatility, we examine whether banking structure, given bank (financial) development, exerts any nontrivial effect on industrial growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the variance of real value added per firm growth. Finally a variety of sensitivity checks show that our findings remain for different model specifications, banking market structure measures, liquidity needs indicators, and omitted variables.

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File URL: http://web.unlv.edu/projects/RePEc/pdf/1206.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by University of Nevada, Las Vegas , Department of Economics in its series Working Papers with number 1206.

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Length: 32 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:nlv:wpaper:1206

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Keywords: Bank Concentration; External Liquidity; Bank Development; Industrial Growth Volatility.;

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