This paper summarizes the effects of deregulation of restrictions on bank entry and expansion on the real economy. The evidence suggests that following state-level deregulation of restrictions on branching, state economic growth accelerated.
This better growth performance was especially pronounced in the entrepreneurial sector. In addition to faster growth, macroeconomic stability improved with interstate deregulation that allowed that banking system to integrate across state lines. This deregulation reduced the sensitivity of state economies to shocks to their own banks’ capital.
Source: The University of Pennsylvania
Author: Philip E. Strahan