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Distance and International Banking

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  • Claudia M. Buch

Abstract

This paper asks how important distance is as a determinant of international banking and whether distance has become less important over time. If technological progress has lowered information costs and if information costs increase in distance, the importance of distance should have declined. I use data on assets and liabilities of commercial banks from five countries (France, Germany, Italy, UK, and US) in 50 host countries for the years 1983-99 to test this hypothesis. Generally, I find that banks hold significantly lower assets in distant markets and that the importance of distance for the foreign asset holdings of banks has not changed. Copyright Blackwell Publishing Ltd 2005.

Suggested Citation

  • Claudia M. Buch, 2005. "Distance and International Banking," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 787-804, September.
  • Handle: RePEc:bla:reviec:v:13:y:2005:i:4:p:787-804
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    References listed on IDEAS

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    1. Richard Portes & =20 H=E9l=E8ne Rey, 2001. "The Determinants of Cross-Border Equity Flows: The Geography of=20 Information," International Finance 0012002, EconWPA.
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    8. Allen N. Berger & Anil K. Kashyap & Joseph M. Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trips It's Been," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 55-218.
    9. Stulz, Rene M, 1981. "On the Effects of Barriers to International Investment," Journal of Finance, American Finance Association, vol. 36(4), pages 923-934, September.
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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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