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Exporting Liquidity: Branch Banking and Financial Integration

42 Pages Posted: 18 Apr 2013 Last revised: 17 Aug 2013

Erik Gilje

University of Pennsylvania - The Wharton School

Elena Loutskina

University of Virginia - Darden School of Business

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2013

Abstract

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.

Keywords: Financial Integration, Branch Banking, Securitization

JEL Classification: G20, G21

Suggested Citation

Gilje, Erik and Loutskina, Elena and Strahan, Philip E., Exporting Liquidity: Branch Banking and Financial Integration (August 2013). Darden Business School Working Paper No. 2252920. Available at SSRN: https://ssrn.com/abstract=2252920 or http://dx.doi.org/10.2139/ssrn.2252920

Erik Gilje (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Elena Loutskina

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-4031 (Phone)

Philip Strahan

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www2.bc.edu/~strahan

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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