All Banks Great, Small, and Global: Loan pricing and foreign competition / Beatriz de Blas, Katheryn Niles Russ.

Format:

Book

Author/Creator:

de Blas, Beatriz.

Contributor:

National Bureau of Economic Research.

Russ, Katheryn Niles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16029.

NBER working paper series no. w16029

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

All Banks Great, Small, and Global

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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.

Notes:

Print version record

May 2010.