Financial Integration and Credit Democratization: Linking Banking Deregulation to Economic Growth

50 Pages Posted: 2 Sep 2012 Last revised: 27 Feb 2018

See all articles by Elizabeth Berger

Elizabeth Berger

Cornell University

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business

Edwin Hu

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Morad Zekhnini

Tulane University

Date Written: November 16, 2017

Abstract

We document a positive effect of financial integration on economic growth. Using US state-by-state financial deregulations, we find that economic growth occurred in states where bank deregulation solved a capital immobility problem. We use a matching method that constructs synthetic counterfactual states to identify the channels that link bank deregulation to financial integration, and thereby to economic growth. Our results reveal a correlation between financial integration and subsequent banking sector changes including improved bank efficiency, better lending and borrowing rates, and an expansion in loan recipients. We show that financial integration democratizes lending and spurs economic growth.

Suggested Citation

Berger, Elizabeth and Butler, Alexander W. and Hu, Edwin and Zekhnini, Morad, Financial Integration and Credit Democratization: Linking Banking Deregulation to Economic Growth (November 16, 2017). Available at SSRN: https://ssrn.com/abstract=2139679 or http://dx.doi.org/10.2139/ssrn.2139679

Elizabeth Berger

Cornell University ( email )

Ithaca, NY 14853
United States

Alexander W. Butler (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)

HOME PAGE: http://www.owlnet.rice.edu/~awbutler/

Edwin Hu

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

United States Securities and Exchange Commission
100 F St NE
Washington, DC 20549
United States

Morad Zekhnini

Tulane University ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

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