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The Banking Sector and Recovery in the EU Economy

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Author Info

  • Ray Barrell

    ()

  • Tatiana Fie

    ()

  • John Fitz Gerald

    (ESRI, Dublin.)

  • Ali Orazgani

    ()

  • Rachel Whitworth

    ()

Abstract

Banks within Europe have become larger and more international as Europe has moved towards a unified financial services market, but this trend has been reversed since the crisis. In order to establish the effect of these structural changes on output in Europe, we use a micro data set to investigate the impact of size (as measured by asset size) on banks’ net interest margins. We show that larger banks offer lower borrowing costs for firms, which raises sustainable output. We then use NiGEM to look at the impact of banks becoming smaller and moving back into their home territory. We investigate the impacts on output according to country size, showing that the effects are generally larger in small countries, and also larger in economies that are more dependent on bank finance for their business investment decisions.

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Bibliographic Info

Article provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.

Volume (Year): 216 (2011)
Issue (Month): 1 (April)
Pages: R41-R52

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Handle: RePEc:sae:niesru:v:216:y:2011:i:1:p:r41-r52

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Related research

Keywords: Net interest margins; bank size; European financial integration; economic growth; bank regulation;

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Cited by:
  1. O'Toole, Conor & Ryan, Robert & McCann, Fergal, 2014. "Does Bank Market Power Affect SME Financing Constraints?," Papers RB2014/1/5, Economic and Social Research Institute (ESRI).
  2. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12.
  3. FitzGerald, John & Znuderl, Nusa & Duffy, David & CASE (Poland) & CPB (Netherlands) & DIW Berlin (Germany) & ETLA (Finland) & The Kiel Institute for the World Economy (Germany) & NIESR (United Kingdom, 2012. "Economic Assessment of the Euro Area: Winter 2011/2012 Report," Research Series, Economic and Social Research Institute (ESRI), number sustat29, September.

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