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http://hdl.handle.net/10419/37276
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| Title: | | Banks in Space: Does Distance Really Affect Cross-Border Banking?  |
| Authors: | | Neugebauer, Katja |
| Issue Date: | | 2010 |
| Series/Report no.: | | Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Risk Taking and Productivity in International Banking E7-V3 |
| Abstract: | | During the last years, gravity equations have leapt from the trade literature over into the literature on financial markets. Martin and Rey (2004) were the first to provide a theoretical model for cross-border asset trade, yielding a structural gravity equation that could be tested empirically. In this paper, I use a gravity model to evaluate factors that affect cross-border banking. Furthermore, I extend the baseline model to allow for third-country effects, which have been shown to matter for international trade, using spatial econometric techniques. I try to answer the following question: First, is there a spatial dimension in cross-border banking? Second, if so, has it changed over time and third, what happens if this spatial dimension is ignored? I use bilateral data on cross-border banking assets for 15 countries over the time period 1995-2005, and I estimate crosssection regressions for each year. I find strong evidence for a spatial dimension in cross-border banking. Furthermore, the direct effect of distance vanishes when applying spatial econometric techniques. |
| Subjects: | | spatial econometrics gravity equation banking market integration distance puzzle |
| JEL: | | G21 E44 F30 |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Jahrestagung des Vereins für Socialpolitik 2010 (Kiel): Ökonomie der Familie
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