Bank Financing and Growth: Evidence from Early 1900s Texas
Linda M. Hooks
Washington and Lee University - Williams School of Commerce, Economics, and Politics
May 30, 2012
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.
Number of Pages in PDF File: 31
Keywords: financial development, Texas, bank history
JEL Classification: E44, G21, N21working papers series
Date posted: January 31, 2013
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