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Exporting Liquidity: Branch Banking and Financial Integration

  • Erik Gilje
  • Elena Loutskina
  • Philip E. Strahan
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    Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.

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    File URL: http://www.nber.org/papers/w19403.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19403.

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    Date of creation: Sep 2013
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    Publication status: published as "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, Volume 71, Issue 3, June 2016, Pages: 1159–1184.
    Handle: RePEc:nbr:nberwo:19403
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