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A Spatial Model of Bank Branches in Canada

Author

Listed:
  • Heng Chen
  • Matthew Strathearn

Abstract

This research aims to empirically analyze the spatial distribution of bank-branch networks in Canada. We study the market structure (both industrial and geographic concentrations) within the networks’ own or adjacent postal areas. Our empirical framework considers branch density (the ratio of the total number of branches to the area size) by employing a spatial two-way fixed-effects model. Our main finding is that there are no effects associated with market structure; however, there are strong spatial socioeconomic effects from the networks' own and nearby areas. In addition, we also study the effect of spatial competition from rival banks: we find that large banks and small banks tend to avoid markets dominated by their competitors.

Suggested Citation

  • Heng Chen & Matthew Strathearn, 2020. "A Spatial Model of Bank Branches in Canada," Staff Working Papers 20-4, Bank of Canada.
    • Handle: RePEc:bca:bocawp:20-4
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    References listed on IDEAS

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    Cited by:

    1. Heng Chen & Marie-Hélène Felt, 2022. "Canadians’ Access to Cash Before and During the COVID-19 Pandemic," Discussion Papers 2022-15, Bank of Canada.
    2. Laura Barbieri & Mariarosa Borroni & Andrea Lippi & Mariacristina Piva & Simone Rossi, 2021. "Determinants of Bank Branch Presence in Local Areas: A Comparison Between North and South of Italy," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(9), pages 1-15, August.
    3. Walter Engert & Kim Huynh, 2022. "Cash, COVID-19 and the Prospects for a Canadian Digital Dollar," Discussion Papers 2022-17, Bank of Canada.
    4. Helmut Stix, 2020. "A spatial analysis of access to ATMs in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/20, pages 39-59.
    5. Heng Chen & Matthew Strathearn & Marcel Voia, 2021. "Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial Innovation," Staff Working Papers 21-28, Bank of Canada.
    6. Marie-Hélène Felt, 2020. "Losing Contact: The Impact of Contactless Payments on Cash Usage," Staff Working Papers 20-56, Bank of Canada.
    7. Heng Chen & Walter Engert & Kim Huynh & Daneal O’Habib, 2021. "An Exploration of First Nations Reserves and Access to Cash," Discussion Papers 2021-8, Bank of Canada.

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    More about this item

    Keywords

    Firm dynamics; Market structure and pricing;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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