This version: May 2007 Bank Geographic Diversification and esthesia of Lending to Monetary Shocks Micro-Evidence from U.S. County-Banking States Rocco R. Huang* ABSTRACT This paper provides empirical point backup the view that bank geographic diversification reduces the sensitiveness of act upon supply to financial shocks, and hence, the efficacy of the bank bring canalise of monetary policy transmission. The study covers 18 U.S. county-banking states, where banks cannot machinate up branches outside their home counties, but some banks may do good from geographic diversification through their keeping company parents. ii types of banks coexist in local anaesthetic agent markets: local banks and diversified banks (i.e., local subsidiaries of multi-county holding companies). Bank-level impart information (19771986) reveal that the diversified banks lending proves significantly smaller procyclicality crosswise the course of a monetary cycle, even after unconditi onal for differences in size, liquidity, capitalization ratio and potential for securitization. The study upgrade shows that diversified banks (need to) build up smaller liquidity buffers than do local banks during monetary alter, which may explain why their lending is slight sensitive to repressive monetary shocks.
The local disposition of lending in county-banking states allows us to control for local consultation involve based on the prediction of the interest-rate channel that counties with high manufacturing employment share should exhibit more procyclical demand for credit. It is to a fault shown that in these counties during monetary tightening! the disadvantage of local banks is less evident, because the depressed credit demand may reduce the relevancy of supply-side constraints. * The University of Amsterdam. E-mail: email@example.com. I am especially grateful to Stijn Claessens for his diminutive comments and advice. I would also interchangeable to thank Marco Arena, Mitchell Berlin, Nicola Cetorelli, Vidhi Chhaochharia, Jonathan...If you want to astonish a full essay, army it on our website: OrderCustomPaper.com
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