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Banking across Borders

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  • Friederike Niepmann

Abstract

Banking across borders has risen substantially over the past two decades. Yet there is significant heterogeneity in the international and global activities of banks across countries. This paper develops and tests a theoretical model that explains this variation from an international trade theory perspective. In the model, banking across borders arises from differences in factor endowments and differences in banking sector efficiencies between countries. The paper shows how these differences determine banks’ foreign asset and liability holdings as well as foreign direct investment in the banking sector. It highlights the differential effects of capital account and banking sector liberalization on banks’ foreign positions and international capital flows. The model is consistent with major stylized facts on cross-border banking. The data strongly support its cross-sectional predictions.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-02/cesifo1_wp4120.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4120.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4120

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Keywords: cross-border banking; international capital flows; trade in banking services;

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References

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Citations

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Cited by:
  1. Linda S. Goldberg, 2013. "Banking Globalization, Transmission, and Monetary Policy Autonomy," NBER Working Papers 19497, National Bureau of Economic Research, Inc.
  2. Friederike Niepmann, 2013. "Banking across borders with heterogeneous banks," Staff Reports 609, Federal Reserve Bank of New York.
  3. Friederike Niepmann & Tim Schmidt-Eisenlohr, 2014. "International Trade, Risk and the Role of Banks," CESifo Working Paper Series 4761, CESifo Group Munich.
  4. Claudia M. Buch & Katja Neugebauer & Christoph Schröder, 2013. "Changing Forces of Gravity: How the Crisis Affected International Banking," IAW Discussion Papers 100, Institut für Angewandte Wirtschaftsforschung (IAW).
  5. Friederike Niepmann & Tim Schmidt-Eisenlohr, 2013. "Banks in international trade finance: evidence from the U.S," Staff Reports 633, Federal Reserve Bank of New York.
  6. David VanHoose, 2013. "A Model of International Trade in Banking Services," Open Economies Review, Springer, vol. 24(4), pages 613-625, September.
  7. Philip Lane, 2013. "International Capital Flows and Domestic Financial Conditions: Lessons for Emerging Asia," The Institute for International Integration Studies Discussion Paper Series iiisdp438, IIIS.
  8. Lane, Philip R. & McQuade, Peter, 2013. "Domestic credit growth and international capital flows," Working Paper Series 1566, European Central Bank.
  9. Linda S. Goldberg, 2013. "Banking globalization, transmission, and monetary policy autonomy," Staff Reports 640, Federal Reserve Bank of New York.
  10. Daniel Carvalho, 2014. "Financial Integration and the Great Leveraging," Working Papers w201407, Banco de Portugal, Economics and Research Department.

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