The Finance-Growth Nexus: Evidence from Bank Branch Deregulation

Jayaratne, Jith; Strahan, Philip E.

doi:10.2307/2946668

Cited by 1,426 publications

(946 citation statements)

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“…This increases our 31 The OLS regression is of the form yit = αi + β t + λB R it + εit, where yit is the outcome of interest and B R it is the cumulative number of branches opened in rural unbanked locations per capita. 32 The coefficient on initial financial development time trend interaction term shows that rural poverty was throughout lower in more financially developed states. 33 The point estimate for the marginal effect of rural banks on poverty is -4.74, while the sample means for rural poverty and rural banked locations is 48.1 and 3.7 respectively.…”

Section: Instrumental Variables Evidencementioning

confidence: 99%

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Burgess

Pande

2005

American Economic Review

1,029

625

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Lack of access to finance is often cited as a key reason for why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirical evidence on this issue. Between 1977 and 1990, the Indian central bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four locations with no bank branches. We show that, between 1977 and 1990, this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse was true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output.

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Section: Instrumental Variables Evidencementioning

confidence: 99%

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Burgess

Pande

2005

American Economic Review

1,029

625

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“…The rationale behind this choice is that banks prefer to enter and extend loans in markets that are easier to monitor (in the sense of geographic proximity), more institutionally similar (in the sense of a common legal framework), and where their investments are better protected. This procedure is in spirit similar to Jayaratne and Strahan (1996) who use the removal of barriers to bank entry in the U.S. as an instrument to show that improvements in the quality of bank lending are causally related to economic performance.…”

Section: Endogeneity Of Foreign Bank Entrymentioning

confidence: 99%

'When the Cat's Away the Mice Will Play': Does Regulation at Home Affect Bank Risk Taking Abroad?

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Macroprudential Research NetworkThis paper presents research conducted within the Macroprudential Research Network (MaRs). The network is composed of economists from the European System of Central Banks (ESCB), i.e. the 27 national central banks of the European Union (EU) and the European Central Bank. The objective of MaRs is to develop core conceptual frameworks, models and/or tools supporting macro-prudential supervision in the EU. The research is carried out in three work streams: 1) Macro-financial models linking financial stability and the performance of the economy; 2) Early warning systems and systemic risk indicators; 3) Assessing contagion risks. MaRs is chaired by Philipp Hartmann (ECB). Paolo Angelini (Banca d'Italia), Laurent Clerc (Banque de France), Carsten Detken (ECB), Cornelia Holthausen (ECB) and Katerina Šmídková (Czech National Bank) are workstream coordinators. Xavier Freixas (Universitat Pompeu Fabra) and Hans Degryse (Katholieke Universiteit Leuven and Tilburg University) act as external consultant. Angela Maddaloni (ECB) and Kalin Nikolov (ECB) share responsibility for the MaRs Secretariat. The refereeing process of this paper has been coordinated by a team composed of Cornelia Holthausen, Kalin Nikolov and Bernd Schwaab (all ECB). The paper is released in order to make the research of MaRs generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB or of the ESCB. This paper provides the …rst empirical evidence that bank regulation is associated with cross-border spillover e¤ects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9613 …rms in 1976 di¤erent localities across 16 countries. We …nd that lower barriers to entry, tighter restrictions on bank activities, and higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The e¤ects are stronger when banks are less e¢ ciently supervised at home, and are observed to exist independently from the impact of host-country regulation. AcknowledgementsJEL classi…cation: G21, G28, G32. Keywords: bank regulation, cross-border …nancial institutions, lending standards, …nancial risk. 1 Non-technical summaryDoes the strictness of home-country bank regulation and supervision affect lendi...

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“…Examples include Jayaratne and Strahan (1996), King and Levine (1993), Levine and Zervos (1998), Rajan and Zingales (1998), Guiso, Sapienza, andZingales (2004), andCetorelli andStrahan (2006). Similarly, recent empirical evidence strongly suggests that during recessions industries with higher external …nancial dependence are hit harder in terms of production growth (Braun and Larrain 2005), value added (Kroszner, Laeven, and Klingebiel 2007), capital formation, and number of establishments (Dell'Ariccia, Detragiache, and Rajan 2008).…”

Section: Introductionmentioning

confidence: 99%

Financing Constraints and Unemployment: Evidence from the Great Recession

Duygan-Bump¹,

Levkov²,

Montoriol‐Garriga³

2014

SSRN Journal

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This paper exploits the differential financing needs across industrial sectors and provides strong empirical evidence that financing constraints of small businesses in the United States are important in explaining the unemployment dynamics during the Great Recession. We show that workers in small firms are more likely to become unemployed during the 2007-09 financial crisis if they work in industries with high external financing needs. We find very similar results for the 1990-91 recession, but not for the 2001 recession, where only the former was associated with a reduction in loan supply. These findings further support the credit constraints hypothesis.

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The Finance-Growth Nexus: Evidence from Bank Branch Deregulation

Cited by 1,426 publications

References 2 publications

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

'When the Cat's Away the Mice Will Play': Does Regulation at Home Affect Bank Risk Taking Abroad?

Financing Constraints and Unemployment: Evidence from the Great Recession

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