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Shrinking Networks: A Spatial Analysis of Bank Branch Closures

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  • Anna Tranfaglia

Abstract

As more consumers take advantage of online banking services, branch networks are declining across the country. Limited attention has been given to identifying any possible spatial patterns of branch closures and, more importantly, the community demographics where branches close their doors. This analysis uses an innovative spatial statistics concept to study financial services: Using data from 2010 to 2016, a random labelling test is conducted to understand branch closure clustering in the Philadelphia, Chicago, and Baltimore metropolitan statistical areas (MSAs). Additionally, spatial autocorrelation is tested, and an MSA-level spatial regression analysis is done to see if there is a pattern to branch closures in metropolitan areas. I find evidence of branch closure clusters in the Chicago and Philadelphia MSAs; however, this spatial pattern is only observable within the suburbs, not the primary city itself. Using a random labelling test is a methodological innovation in regional economic studies and propels our understanding of banking deserts and underserved neighborhoods.

Suggested Citation

  • Anna Tranfaglia, 2018. "Shrinking Networks: A Spatial Analysis of Bank Branch Closures," Working Papers 18-12, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:18-12
    DOI: 10.21799/frbp.wp.2018.12
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2018/wp18-12.pdf
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    Cited by:

    1. Jordan van Rijn & Shuwei Zeng & Paul Hellman, 2021. "Financial institution objectives and auto loan pricing: Evidence from the survey of consumer finances," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(3), pages 995-1039, September.
    2. Joan Calzada & Xavier Fageda & Fernando Martínez-Santos, 2023. "Mergers and bank branches: two decades of evidence from the USA," Empirical Economics, Springer, vol. 64(5), pages 2411-2447, May.

    More about this item

    Keywords

    branch closures; GIS; spatial autocorrelation; marked point process; random labelling test; Philadelphia; Chicago; Baltimore;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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