The Geography of European Cross-Border Banking: The Impact of Cultural and Political Factors
Maastricht University METEOR Research Memorandum No. RM/08/008
50 Pages Posted: 28 Apr 2008 Last revised: 2 May 2008
Date Written: April 24, 2008
Abstract
We investigate the determinants of European banking market integration with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans and deposits, the study uses various gravity models that are augmented by societal proxies. While trade-theoretic reasoning can explain part of the surge in cross-border banking, we demonstrate that distance and borders still matter in the geography of European cross-border banking. Moreover, we can identify cultural differences and different legal family origin as important barriers to integration.
Keywords: cross-border loans, cross-border deposits, banking market integration, gravity model, culture, European single market
JEL Classification: C21, F34, F36, K20, Z10
Suggested Citation: Suggested Citation
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