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Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Discussion Papers 1344, 45 S.

Franziska Bremus

2013

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Published in: Journal of Banking & Finance 50 (2015), 254-259

Abstract

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.

Franziska Bremus

Research Associate in the Macroeconomics Department



JEL-Classification: E44;F41;G21
Keywords: Cross-border lending, bank foreign direct investment, bank market concentration, net interest margins
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/88773

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