We use a matching method that constructs synthetic counterfactual states to identify the channels that link bank deregulation to financial integration, and thereby to economic growth. We document a positive, but conditional, effect of financial integration on economic growth. We explore the heterogeneous effects of financial integration across states depending on the capital mobility in each state. Our results reveal a correlation between financial integration and subsequent banking sector changes related to an expansion in loan recipients. We show that financial integration democratizes lending and spurs economic growth.
Citation
Elizabeth A. Berger et al., Financial Integration and Credit Democratization: Linking Banking Deregulation to Economic Growth, 45 Journal of Financial Intermediation 100857 (2021).