8  Rajan and Zingales (1998) and Cetorelli and Gambera (2001). In addition, Levine, Loayza, and Beck (2000) shows that the exogenous component of banking development is positively related to economic growth. 4  BIS Review 30/2006  The state-by-state deregulation of branching and banking restrictions provides a useful laboratory for investigating the effect of better banking on economic growth.
Because states share a common legal system and broadly similar institutional environments, we can investigate the response of the state economy to policy changes that lead to more-efficient finance.