Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence
No 1344, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
Patterns in cross-border banking have changed since the global financial crisis. This may affect domestic bank market structures and macroeconomic stability in the longer term. In this study, I theoretically and empirically analyze how different modes of cross-border banking impact bank concentration. I use a two- country general equilibrium model with heterogeneous banks developed by De Blas and Russ (2010) to grasp the effect of cross-border lending and foreign direct investment in the banking sector on bank market structures. The model suggests that both cross-border lending and bank FDI mitigate concentration. Empirical evidence from a linked micro-macro panel dataset of 18 OECD countries supports the theoretical predictions: higher volumes of bank FDI and of cross-border lending coincide with lower Herfindahl-indexes in bank credit markets.
Keywords: Cross-border lending; bank foreign direct investment; bank market concentration; net interest margins (search for similar items in EconPapers)
JEL-codes: E44 F41 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-int and nep-mac
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Journal Article: Cross-border banking, bank market structures and market power: Theory and cross-country evidence (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1344
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