Donald Morgan

Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045

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Institutional Affiliation: Federal Reserve Bank of New York

NBER Working Papers and Publications

May 2003Bank Integration and State Business Cycles
with Bertrand Rime, Philip Strahan: w9704
We investigate how the better integration of U.S. banks across states has affected economic volatility within states. In theory, the link between bank integration and volatility is ambiguous; integration tends to dampen the impact of bank capital shocks on state activity, but it amplifies the impact of firm collateral shocks. Empirically, the net effect has been stabilizing as year-to-year fluctuations in employment growth within states fall as that state's banks become better integrated (via holding companies) with banks in other states. The magnitudes are large, and the effects are most pronounced in states with relatively undiversified economies. Consistent with our model, we find the link between economic growth and bank capital within a state weakens with integration, whereas the link...

Published: Morgan, Donald P., Bertrand Rime and Philip E. Strahan. "Bank Integration And State Business Cycles," Quarterly Journal of Economics, 2004, v119(4,Nov), 1555-1584. citation courtesy of

Foreign Bank Entry and Business Volatility: Evidence from U.S. States and Other Countries
with Philip Strahan: w9710
Theory suggests that bank integration (financial integration generally) can magnify or dampen the business cycles, depending on the importance of shocks to firm collateral versus shocks to the banking sector. In this paper, we show empirically that bank integration across U.S. states over the late 1970s and 1980 dampened economic volatility within states. Internationally, however, we find that foreign bank integration, which advanced widely during the 1990s, has been either unrelated to volatility of firm investment spending or positively related to that volatility. The results suggest the possibility that business spending may become more volatile as countries open their banking sectors to foreign entry.

Published: Donald P. Morgan & Philip E. Strahan, 2004. "Foreign Bank Entry and Business Volatility: Evidence from U.S. States and Other Countries," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 8, pages 241-270 Central Bank of Chile.

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