 Banking across borders with heterogeneous banksJournal of International Economics, 2023, vol. 142, issue C Abstract: This paper develops a model of banking across borders where banks differ in their efficiencies. Operating abroad allows the most efficient banks that have a large enough scale to overcome the associated fixed costs to increase their leverage, size and profits even more. Banking globalization increases welfare because these banks, by maximizing the return on loans and minimizing funding costs, improve the allocation of capital by channeling capital across borders. At the same time, global banking sector efficiency increases because the least efficient banks exit. Foreign exposures data for German banks deliver new model-derived stylized facts. In particular, the average efficiency of banks that operate abroad is lower for host countries that have a less efficient banking sector, are larger and feature lower impediments to foreign bank entry. Keywords: Cross-border banking; Heterogeneity; Multinational banks; Trade in services (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:142:y:2023:i:c:s002219962300034x DOI: 10.1016/j.jinteco.2023.103748 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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