US Banking Consolidation and the Volatility of Emerging Market Lending: Role of Deregulatory Initiatives

摘要

This paper examines how United States (US) banking industry consolidation, strengthened by deregulatory initiatives, has contributed to the volatility of US bank lending in emerging markets. Big money center banks that emerged from mergers and acquisitions during 1984-2005 are found to have increased the volatility in US bank emerging market lending. In the same period, the regulatory environment for US banks changed fundamentally towards deregulation. Attempts to measure the impact of industry consolidation on the volatility of US banks' emerging market lending in an Ordinary Least Squares model delivered no statistically significant results. When, however, deregulation dummies are used as instrumental variables in the Two-Stage Least Squares model, a clear picture emerges. Deregulation is shown to raise the volatility of US bank emerging market financing as a by-product of industry consolidation.