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

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  • Victor Aguirregabiria
  • Robert Clark
  • Hui Wang

Abstract

Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to high-loan-demand areas, limiting credit access. Using bank-county-year-level data, we provide evidence of geographic imbalance of deposits and loans and develop a methodology for investigating the contribution to this imbalance of branch networks, market power, and scope economies. Results are based on a novel measure of imbalance and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets. Counterfactual experiments show branch networks, scope economies, and local competition affect credit flow to disadvantaged markets.

Suggested Citation

  • Victor Aguirregabiria & Robert Clark & Hui Wang, 2025. "The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Synergies, and Local Competition," American Economic Review, American Economic Association, vol. 115(6), pages 1818-1856, June.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:6:p:1818-56
    DOI: 10.1257/aer.20200374
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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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