Journal Article

Bank diversification, economic diversification?

Abstract: Business cycle volatility has fallen in the United States during the past two decades. Trehan (2005) explains some of the possible mechanisms behind our now more stable economy. Some researchers have argued, for instance, that businesses manage inventory better today than in the past, or that innovations in financial markets have helped smooth out business fluctuations; others have emphasized better economic policy; still a third camp argues for nothing more than good luck. ; This Economic Letter explores in some detail one aspect of better finance. Changes in regulations during the 1980s and early 1990s facilitated a more integrated banking system, which in turn helped states share risks better.

Keywords: Bank competition; Bank mergers; Economic development;

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: FRBSF Economic Letter

Publication Date: 2006

Order Number: 10