Personal Bankruptcy Filings Rates

Unemployment Rate
Personal Bankruptcy Filings Rates (All Counties)
Total Housing Permits
Unemployment rate: one would expect the correlation coefficient between the unemployment rate and the demand for bank loans to be negative. This would show an inverse relationship whereby an increase in the unemployment rate will lead to a decrease in the demand for bank loans. The economic explanation for this would be that as the unemployment rate rises, aggregate income decreases and fewer individuals are able to afford a bank loan.
bankruptcy rate: on the same logical path, bankruptcy rate and demand for bank loans will move in different directions: as the bankruptcy rate increases, the demand for bank loans decreases, because more people have declared bankruptcy and no longer have the necessary income to apply and obtain bank loans. Thus, demand for bank loans will fall.
c. growth rate in housing permits: one would expect the correlation coefficient to be positive, because an increase in growth rate in housing permits would show that houses are being built and, at the same time, that there are the necessary instruments to finance this, namely through new bank loans. One would expect the two variables to move together (as one increases, the other will increase as well).
2. Correlations: The estimated correlation coefficients are often quite strong (and positive) and this is particularly true when comparing state (NJ) economic figures with county results. In the case of the unemployment rate, for example, the correlation coefficient is 0.831, comparing NJ to Cape May. This tends to show that there is a strong relationship between economic results at state level and those at country level and that the economic activity state-wide has an impact on economic activity within the county. The impact is thus high.
3. Bank management should take into consideration forecasts about the U.S. And the NJ economy when planning for future growth because (1) the evolution of the economy at these levels will show which way the economy in the county will go and, as a consequence, whether the population and businesses will be able to apply and obtain bank loans and other instruments and (2) looking at national and state forecasts will help managers understand more about business and economic cycles and predict evolutions for the future.
Table 2 Questions
1) i. Short-term and intermediate, the correlation coefficients show a direct and relative strong relationship between the deposits per office growth rate and market share. However, over the long-term, the correlation coefficient is negative, but very small, so one cannot actually conclude that the relationship becomes inverse proportional. It is also logical that this should be a relationship of direct proportionality: one can expect that market share shows how much of the market the bank is able to cover with its instruments, products and services. One of these products is the deposit that the banks offer to clients as a savings instrument. A larger deposit per office growth rate will eventually lead to a gradual increase in market share.
ii. This is still relative, and it is difficult to answer this question. On one hand, the coefficient correlations over the long-term are slightly negative, so one can conclude that having a greater physical presence increases the bank’s statewide market share only over the short and intermediate term. Over the long-term, it is likely that other factors will become more significant and contribute to the bank’s market share.
2) i, ii. The conclusions are similar for the county: the correlation coefficient is still positive and strong over the short and intermediate term, but negative and not very large over the long-term.
3) The share of the number of offices has been diminishing, while the share of the deposits has also been diminishing, but at a lower rate. This may show that the company has already reached a saturation in terms of offices and that it should use its existing infrastructure in order to promote its services, particularly the deposits it offers to the population.