Advanced Search
MyIDEAS: Login

All banks great, small, and global: Loan pricing and foreign competition

Contents:

Author Info

  • de Blas, Beatriz
  • Russ, Katheryn Niles

Abstract

Using a new model of heterogeneous, imperfectly competitive lenders and a simple search process, we show how endogenous markups (the net interest margin commonly used to proxy lending-to-deposit rate spreads) can increase with FDI while the rates banks charge to borrowers remain largely unchanged or actually fall. We contrast the competitive effects from cross-border bank takeovers with those of cross-border lending by banks located overseas, which in most cases reduces markups and interest rates. Although both types of liberalization can increase the cost-efficiency of lending in the liberalizing country, the distinction arises because opening toward cross-border lending increases competitive pressures (contestability) in the credit market, while takeovers do not. Both policies can increase aggregate output and generate permanent current account imbalances.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S1059056012000810
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 26 (2013)
Issue (Month): C ()
Pages: 4-24

as in new window
Handle: RePEc:eee:reveco:v:26:y:2013:i:c:p:4-24

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Financial liberalization; Imperfect competition; Heterogeneous banks; Markups;

Other versions of this item:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Friederike Niepmann, 2013. "Banking across borders with heterogeneous banks," Staff Reports 609, Federal Reserve Bank of New York.
  2. Friederike Niepmann, 2012. "Banking across borders," Staff Reports 576, Federal Reserve Bank of New York.
  3. Franziska Bremus, 2011. "Financial Integration and Macroeconomic Stability: What Role for Large Banks?," Discussion Papers of DIW Berlin 1178, DIW Berlin, German Institute for Economic Research.
  4. Katheryn N. Russ & Diego Valderrama, 2009. "A Theory of Banks, Bonds, and the Distribution of Firm Size," NBER Working Papers 15454, National Bureau of Economic Research, Inc.
  5. Hoxha, Indrit, 2013. "The market structure of the banking sector and financially dependent manufacturing sectors," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 432-444.
  6. Philip R. Lane, 2008. "EMU and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp272, IIIS.
  7. Galema, Rients & Koetter, Michael & Liesegang, Caroline, 2013. "Cost leadership and bank internationalization," Discussion Papers 57/2013, Deutsche Bundesbank, Research Centre.
  8. Franziska Bremus, 2013. "Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence," Discussion Papers of DIW Berlin 1344, DIW Berlin, German Institute for Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:26:y:2013:i:c:p:4-24. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.