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Bank Competition and Investment Costs across Space

Author

Listed:
  • Olivia Bordeu
  • Gustavo González
  • Marcos Sorá

Abstract

Using detailed loan-level data from Chile, we document significant geographic differences in interest rates for firm loans. Firms in cities with high borrowing costs pay around 280 basis points more than firms in low-cost cities. While these estimates account for differences in firm and loan characteristics across cities, we find evidence that they are related to the level of concentration in the local loan market. We examine the pass-through of monetary policy to lending rates and find that banks with higher local market shares exhibit stronger pass-through, aligning with oligopolistic models of branch competition.

Suggested Citation

  • Olivia Bordeu & Gustavo González & Marcos Sorá, 2025. "Bank Competition and Investment Costs across Space," Working Papers Central Bank of Chile 1042, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:1042
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    File URL: https://www.bcentral.cl/documents/33528/133326/Documento+de+Trabajo+1042.pdf/19132409-6771-6568-f5b4-5f3efd158e4a?t=1747672188904
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    References listed on IDEAS

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    Cited by:

    1. Mary Amiti & Anil K Kashyap & Anna Kovner & David Weinstein, 2026. "Why Do Firms Pay Different Interest Rates on Their Bank Loans?," NBER Working Papers 34870, National Bureau of Economic Research, Inc.

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