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Market segmentation and 1992: toward a theory of trade in financial services

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  • John D. Montgomery
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    Abstract

    The effect of the unification of the European banking market on the efficiency of the allocation of capital across Europe depends on the economic forces behind banking structure. Such forces are not well understood. The paper discusses a conceptual framework for analyzing financial services (especially bank loans and deposits), in which a key distinction is between services offered across borders and those services where location of the intermediary matters. Empirical evidence from Italy is examined that suggests that banking markets are geographically fragmented, possibly because of natural, as opposed to regulatory, barriers to capital mobility. In the light of this conceptual framework and the empirical results, the likely effect of European integration on real capital mobility and efficiency of banking markets is discussed.

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    File URL: http://www.federalreserve.gov/pubs/ifdp/1991/394/default.htm
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1991/394/ifdp394.pdf
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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 394.

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    Date of creation: 1991
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    Handle: RePEc:fip:fedgif:394

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    Keywords: European Economic Community ; Banks and banking; International;

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    1. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-60, September.
    2. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
    3. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
    4. Stephen D. Williamson, 1984. "Costly Monitoring, Financial Intermediation, and Equilibrium Credit Rationing," Working Papers 583, Queen's University, Department of Economics.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    7. Benston, George J & Hanweck, Gerald A & Humphrey, David B, 1982. "Scale Economies in Banking: A Restructuring and Reassessment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 435-56, November.
    8. Rachel McCulloch, 1987. "International Competition in Services," NBER Working Papers 2235, National Bureau of Economic Research, Inc.
    9. Neumark, David & Sharpe, Steven A, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 657-80, May.
    10. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    11. Sydney J. Key, 1989. "Financial integration in the European Community," International Finance Discussion Papers 349, Board of Governors of the Federal Reserve System (U.S.).
    12. Boyd, John H. & Prescott, Edward C., 1986. "Financial intermediary-coalitions," Journal of Economic Theory, Elsevier, vol. 38(2), pages 211-232, April.
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    Cited by:
    1. Dell'Ariccia, Giovanni, 2001. "Asymmetric information and the structure of the banking industry," European Economic Review, Elsevier, vol. 45(10), pages 1957-1980, December.

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