Bank Financing and Growth: Evidence from Early 1900s Texas

31 Pages Posted: 31 Jan 2013

See all articles by Linda M. Hooks

Linda M. Hooks

Washington and Lee University - Williams School of Commerce, Economics, and Politics

Date Written: May 30, 2012

Abstract

This paper explores the consequences of a deepening in financial markets by examining the case of Texas at the turn of the last century. In the early 1900s, the Texas legislature legalized state-chartered banks, and, as a result, Texas experienced increased financial-market depth. The evidence presented below suggests that newly-established state banks played an important role in local economic development, and that the role was linked to agriculture more than to manufacturing. It suggests that banks mostly provided short-term credit to farms for the crop itself, rather than providing credit to farms for improvements or credit to manufacturing firms. The results provide insights for policymakers considering the role of community banks today and more generally, for those considering policies to improve growth in agriculture-based economies today.

Keywords: financial development, Texas, bank history

JEL Classification: E44, G21, N21

Suggested Citation

Hooks, Linda M., Bank Financing and Growth: Evidence from Early 1900s Texas (May 30, 2012). Available at SSRN: https://ssrn.com/abstract=2209320 or http://dx.doi.org/10.2139/ssrn.2209320

Linda M. Hooks (Contact Author)

Washington and Lee University - Williams School of Commerce, Economics, and Politics ( email )

Lexington, VA 24450
United States
540-458-8603 (Phone)
540-458-8639 (Fax)

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