IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/2007788.html
   My bibliography  Save this paper

Evaluating the real effect of bank branching deregulation: comparing contiguous counties across U.S. state borders

Author

Listed:
  • Huang, Rocco

Abstract

This paper proposes a new methodology to evaluate the economic effect of state-specific policy changes, using bank-branching deregulations in the U.S. as an example. The new method compares economic performance of contiguous counties on opposite sides of state borders, where on one side restrictions on statewide branching were removed relatively earlier, to create a natural JEL Classification: G21, G28, O43

Suggested Citation

  • Huang, Rocco, 2007. "Evaluating the real effect of bank branching deregulation: comparing contiguous counties across U.S. state borders," Working Paper Series 788, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2007788
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp788.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jith Jayaratne & Philip E. Strahan, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 639-670.
    2. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 577-599.
    3. Ashcraft, Adam B. & Campello, Murillo, 2007. "Firm balance sheets and monetary policy transmission," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1515-1528, September.
    4. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    5. Robin A. Prager & Timothy H. Hannan, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence From The Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-452, December.
    6. Peter L. Rousseau & Paul Wachtel, 2005. "Economic Growth and Financial Depth: Is the Relationship Extinct Already?," WIDER Working Paper Series DP2005-10, World Institute for Development Economic Research (UNU-WIDER).
    7. Sandra E. Black & Philip E. Strahan, 2002. "Entrepreneurship and Bank Credit Availability," Journal of Finance, American Finance Association, vol. 57(6), pages 2807-2833, December.
    8. Hans Degryse, 2004. "The Impact of Technology and Regulation on the Geographical Scope of Banking," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(4), pages 571-590, Winter.
    9. Philip E. Strahan, 2003. "The real effects of U.S. banking deregulation," Review, Federal Reserve Bank of St. Louis, vol. 85(Jul), pages 111-128.
    10. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    11. Wall, Howard J., 2004. "Entrepreneurship and the deregulation of banking," Economics Letters, Elsevier, vol. 82(3), pages 333-339, March.
    12. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    13. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1437-1467.
    14. Kane, Edward J, 1981. "Accelerating Inflation, Technological Innovation, and the Decreasing Effectiveness of Banking Regulation," Journal of Finance, American Finance Association, vol. 36(2), pages 355-367, May.
    15. Thomas A. Garrett & Gary A. Wagner & David C. Wheelock, 2005. "A spatial analysis of state banking regulation," Papers in Regional Science, Wiley Blackwell, vol. 84(4), pages 575-595, November.
    16. Freeman, Donald G., 2002. "Did state bank branching deregulation produce large growth effects?," Economics Letters, Elsevier, vol. 75(3), pages 383-389, May.
    17. Kane, Edward J, 1984. "Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition," Journal of Finance, American Finance Association, vol. 39(3), pages 759-772, July.
    18. Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 141-161, May.
    19. Myron L. Kwast & Martha Starr-McCluer & John D. Wolken, 1997. "Market definition and the analysis of antitrust in banking," Finance and Economics Discussion Series 1997-52, Board of Governors of the Federal Reserve System (U.S.).
    20. Mark J. Garmaise & Tobias J. Moskowitz, 2006. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," Journal of Finance, American Finance Association, vol. 61(2), pages 495-538, April.
    21. Mark J. Garmaise, 2004. "Confronting Information Asymmetries: Evidence from Real Estate Markets," The Review of Financial Studies, Society for Financial Studies, vol. 17(2), pages 405-437.
    22. Jith Jayaratne & Philip E. Strahan, 1997. "The benefits of branching deregulation," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Dec), pages 13-29.
    23. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-452, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carletti, Elena & Hartmann, Philipp & Ongena, Steven, 2015. "The economic impact of merger control legislation," International Review of Law and Economics, Elsevier, vol. 42(C), pages 88-104.
    2. Manuel Illueca & Lars Norden & Gregory F. Udell, 2009. "Liberalization, Corporate Governance, and Savings Banks," Mo.Fi.R. Working Papers 17, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    3. Sylvia Allegretto & Arindrajit Dube & Michael Reich & Ben Zipperer, 2017. "Credible Research Designs for Minimum Wage Studies," ILR Review, Cornell University, ILR School, vol. 70(3), pages 559-592, May.
    4. Masami Imai, 2008. "Crowding-Out Effects of a Government-Owned Depository Institution: Evidence from a Natural Experiment in Japan," Wesleyan Economics Working Papers 2008-003, Wesleyan University, Department of Economics.
    5. Kakpo, Eliakim, 2018. "The corporate tax, apportionment rules and employment: Evidence using policy discontinuity at U.S. state borders," MPRA Paper 94875, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huang, Rocco R., 2008. "Evaluating the real effect of bank branching deregulation: Comparing contiguous counties across US state borders," Journal of Financial Economics, Elsevier, vol. 87(3), pages 678-705, March.
    2. Popov, Alexander & Zaharia, Sonia, 2019. "Credit market competition and the gender gap in labor force participation: Evidence from local markets," European Economic Review, Elsevier, vol. 115(C), pages 25-59.
    3. Dursun-de Neef, H. Özlem & Schandlbauer, Alexander, 2020. "Procyclical leverage: Evidence from banks’ lending and financing decisions," Journal of Banking & Finance, Elsevier, vol. 113(C).
    4. Mark J. Garmaise & Tobias J. Moskowitz, 2004. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," NBER Working Papers 11006, National Bureau of Economic Research, Inc.
    5. Garmaise, Mark J. & Moskowitz, Tobias J., 2005. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," Working Papers 202, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    6. Francis, Bill & Hasan, Iftekhar & Wang, Haizhi, 2014. "Banking deregulation, consolidation, and corporate cash holdings: U.S. evidence," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 45-56.
    7. Anindo Sarker & Bulent Unel, 2017. "The Impact of Bank Expansion on Self-Employed Business Owners: Evidence from US States," Departmental Working Papers 2017-06, Department of Economics, Louisiana State University.
    8. Kerr, William R. & Nanda, Ramana, 2009. "Democratizing entry: Banking deregulations, financing constraints, and entrepreneurship," Journal of Financial Economics, Elsevier, vol. 94(1), pages 124-149, October.
    9. Kandilov, Ivan T. & Leblebicioğlu, Asli & Petkova, Neviana, 2016. "The impact of banking deregulation on inbound foreign direct investment: Transaction-level evidence from the United States," Journal of International Economics, Elsevier, vol. 100(C), pages 138-159.
    10. Erel, Isil, 2007. "The Effect of Bank Mergers on Loan Prices: Evidence from the U.S," Working Paper Series 2006-19, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    11. Dang, Viet Anh & Lee, Edward & Liu, Yangke & Zeng, Cheng, 2022. "Bank deregulation and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 72(C).
    12. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    13. Wall, Howard J., 2004. "Entrepreneurship and the deregulation of banking," Economics Letters, Elsevier, vol. 82(3), pages 333-339, March.
    14. Lin Tian & Liang Han, 2019. "How local is local? Evidence from bank competition and corporate innovation in U.S," Review of Quantitative Finance and Accounting, Springer, vol. 52(1), pages 289-324, January.
    15. Carow, Kenneth A. & Kane, Edward J., 2002. "Event-study evidence of the value of relaxing long-standing regulatory restraints on banks, 1970-2000," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 439-463.
    16. Goetz, Martin R., 2018. "Competition and bank stability," Journal of Financial Intermediation, Elsevier, vol. 35(PA), pages 57-69.
    17. W. Blake Marsh & Rajdeep Sengupta, 2017. "Competition and Bank Fragility," Research Working Paper RWP 17-6, Federal Reserve Bank of Kansas City.
    18. Randall S. Kroszner & Philip E. Strahan, 2014. "Regulation and Deregulation of the US Banking Industry: Causes, Consequences, and Implications for the Future," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 485-543, National Bureau of Economic Research, Inc.
    19. Philip E. Strahan, 2002. "The Real Effects of U.S. Banking Deregulation," Center for Financial Institutions Working Papers 02-39, Wharton School Center for Financial Institutions, University of Pennsylvania.
    20. Kandilov, Ivan T. & Leblebicioğlu, Aslı & Petkova, Neviana, 2017. "Cross-border mergers and acquisitions: The importance of local credit and source country finance," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 288-318.

    More about this item

    Keywords

    banking deregulation; economic growth; regression discontinuity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:2007788. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.