Working Paper: NBER ID: w19403
Authors: Erik Gilje; Elena Loutskina; Philip E. Strahan
Abstract: Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.
Keywords: bank branch networks; financial integration; mortgage lending; deposit windfalls; shale booms
JEL Codes: G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deposit windfalls (G59) | Mortgage originations (G21) |
| Deposit windfalls (G59) | Retained mortgages (G21) |
| Deposit growth (O16) | Lending activity (G21) |
| Branch presence (Y60) | Positive effect on mortgage lending (G21) |
| Deposit windfalls (G59) | Credit supply (E51) |
| Branch networks (L14) | Liquidity flow into non-boom markets (G19) |
| Contracting frictions (D86) | Impact of deposit windfalls (F65) |
| Deposit windfalls (G59) | Loans subject to contracting frictions (G51) |
| Loans subject to contracting frictions (G51) | Credit availability (G21) |