All Banks Great, Small, and Global: Loan pricing and foreign competition

Beatriz de Blas () and Katheryn Russ

No 16029, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Can allowing foreign participation in the banking sector increase real output, despite the imperfectly competitive nature of the industry? Using a new model of heterogeneous, imperfectly competitive lenders and a simple search process, we show how endogenous markups (the net interest margin commonly used to proxy lending-to-deposit rate spreads) can increase with FDI while the rates banks charge to borrowers are largely unchanged or actually fall. We contrast the competitive effects from cross-border bank takeovers with those of cross-border lending by banks located overseas, which in most cases reduces markups and interest rates. Both policies can increase aggregate output and generate permanent current account imbalances.

JEL-codes: F12 F23 F32 F36 F4 (search for similar items in EconPapers)
Date: 2010-05
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as de Blas, Beatriz & Russ, Katheryn Niles, 2013. "All banks great, small, and global: Loan pricing and foreign competition," International Review of Economics & Finance, Elsevier, vol. 26(C), pages 4-24.

Downloads: (external link)
http://www.nber.org/papers/w16029.pdf (application/pdf)

Related works:
Journal Article: All banks great, small, and global: Loan pricing and foreign competition (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:16029

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w16029

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().