All banks great, small, and global: Loan pricing and foreign competition
AbstractUsing 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 InfoIf 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.
Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 26 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620165
Financial liberalization; Imperfect competition; Heterogeneous banks; Markups;
Other versions of this item:
- Beatriz de Blas & Katheryn Niles Russ, 2010. "All Banks Great, Small, and Global: Loan pricing and foreign competition," NBER Working Papers 16029, National Bureau of Economic Research, Inc.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- 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.
- Katheryn N. Russ & Diego Valderrama, 2009. "A theory of banks, bonds, and the distribution of firm size," Working Paper Series 2009-25, Federal Reserve Bank of San Francisco.
- Diego Valderrama & Katheryn N. Russ, 2009. "A Theory of Banks, Bonds, and the Distribution of Firm Size," Working Papers 916, University of California, Davis, Department of Economics.
- Diego Valderrama & Katheryn N. Russ, . "A Theory of Banks, Bonds, and the Distribution of Firm Size," Working Papers 915, University of California, Davis, Department of Economics.
- Friederike Niepmann, 2013.
"Banking across Borders,"
CESifo Working Paper Series
4120, CESifo Group Munich.
- Friederike Niepmann, 2012. "Banking across borders," Staff Reports 576, Federal Reserve Bank of New York.
- Friederike Niepmann, 2011. "Banking across Borders," DNB Working Papers 325, Netherlands Central Bank, Research Department.
- Niepmann, Friederike, 2013. "Banking across borders," Discussion Papers 19/2013, Deutsche Bundesbank, Research Centre.
- Buch, Claudia M. & Goldberg, Linda S., 2014.
"International banking and liquidity risk transmission: lessons from across countries,"
675, Federal Reserve Bank of New York.
- Claudia M. Buch & Linda S. Goldberg, 2014. "International Banking and Liquidity Risk Transmission: Lessons from Across Countries," NBER Working Papers 20286, National Bureau of Economic Research, Inc.
- Friederike Niepmann, 2013. "Banking across borders with heterogeneous banks," Staff Reports 609, Federal Reserve Bank of New York.
- 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.
- 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.
- Galema, Rients & Koetter, Michael & Liesegang, Caroline, 2013. "Cost leadership and bank internationalization," Discussion Papers 57/2013, Deutsche Bundesbank, Research Centre.
- 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.
- Philip R. Lane, 2008. "EMU and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp272, IIIS.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.