Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45403 
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 1108
Publisher: 
Koç University-TÜSİAD Economic Research Forum (ERF), Istanbul
Abstract: 
The US banking industry offers a unique, natural and fertile environment to study geography's effects on banks' behavior and performance. The literature on banks' operating performance, while extensive, says little about the influence of spatial interactions on banks' performance. We compute and examine, using a physical distance-based spatio-temporal empirical model, the state-wide total factor productivity growth (TFPG) indices of US commercial banks for each state for the 1971-1995 period. We observe that the productivity growth of commercial banks in state i depends strongly, positively, and contemporaneously on the productivity growth of commercial banks located in state i's contiguous states. Further, regulatory space appears to induce frictions and lessen the documented spatial interactions. These findings support our plea that research on commercial banking sector's behavior need to pay a particular attention to the effects of banking geography.
Subjects: 
Spatial
Commercial Banks
Total Factor Productivity Growth
Kalman Filter
JEL: 
D24
C23
G21
G28
K23
Document Type: 
Working Paper

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