Banking Deregulation and Credit Supply: Distinguishing the Balance Sheet and the Competition Channels
51 Pages Posted: 16 May 2014 Last revised: 19 Aug 2017
Date Written: August 1, 2017
Abstract
This paper studies how interstate banking deregulation affects credit supply, focusing on distinguishing the balance sheet and bank competition channels. Using a regression discontinuity design, I find that interstate banking deregulation affects credit supply, not only by legally impacted commercial banks, but also by non-legally impacted non-bank lenders. Controlling for lender-year fixed effects to isolate the balance sheet effect, I find that credit supply by the same lender varies with interstate banking restrictions in different states. Overall, the results suggest that the impact of interstate banking deregulation is mostly driven by the bank competition channel.
Keywords: Banking Competition, Interstate Banking Deregulation, Commercial Real Estate, Regression Discontinuity Design
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