Working Paper

Is a State Bank a Useful Economic Development Tool in the United States?

Robert S. Chirinko
CESifo, Munich, 2022

CESifo Working Paper No. 10098

The possibility of creating a state bank has received much recent attention in the United States. In 2021, six states introduced legislation to create a state bank; in 2019, similar legislation was enacted in California for municipal banks. This paper develops a framework to evaluate state banking, reviews prior experiences with state banking and related alternatives to traditional private banking and identifies five questions determining the advisability of creating a state bank. The overall goal is to shed some light on whether a state bank can be a useful tool to further state economic development and the welfare of state residents.

CESifo Category
Public Finance
Monetary Policy and International Finance
Keywords: state bank, public bank, credit allocation, economic development
JEL Classification: G210, G280, H700