Entry of Foreign Banks and Their Impact on Host Countries

45 Pages Posted: 3 Jan 2007

See all articles by Maria Lehner

Maria Lehner

University of Munich

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2006

Abstract

Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare effects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other.

Keywords: Foreign bank entry, multinational bank, competition in banking, spillovers

JEL Classification: F37, G21, L13, O16

Suggested Citation

Lehner, Maria and Schnitzer, Monika, Entry of Foreign Banks and Their Impact on Host Countries (November 2006). CEPR Discussion Paper No. 5954. Available at SSRN: https://ssrn.com/abstract=954732

Maria Lehner

University of Munich ( email )

Akademiestr. 1/III
D-80799 Munich
Germany
+49 89 2180 2766 (Phone)
+49 89 2180 2767 (Fax)

Monika Schnitzer (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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