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The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Local Synergies, and Competition

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  • Aguirregabiria, Victor
  • Clark, Robert
  • Wang, Hui

Abstract

Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to areas of high loan demand, limiting credit access. We provide evidence of geographic imbalance of deposits and loans, and develop a methodology for investigating the contribution to this imbalance of (i) branch networks, (ii) market power, and (iii) scope economies, using US bank-county-year level data. Results are based on a novel measure of deposits and loans imbalance, and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets, thereby permitting counterfactuals highlighting the role of the three factors.

Suggested Citation

  • Aguirregabiria, Victor & Clark, Robert & Wang, Hui, 2019. "The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Local Synergies, and Competition," CEPR Discussion Papers 13741, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13741
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    More about this item

    Keywords

    Geographic flow of bank funds; Access to credit; Bank competition; Branch networks; Economies of scope between deposits and loans;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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