Working Paper: CEPR ID: DP13741
Authors: Victor Aguirregabiria; Robert Clark; Hui Wang
Abstract: Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to areas of high loan demand, limiting credit access. We provide evidence of geographic imbalance of deposits and loans, and develop a methodology for investigating the contribution to this imbalance of (i) branch networks, (ii) market power, and (iii) scope economies, using US bank-county-year level data. Results are based on a novel measure of deposits and loans imbalance, and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets, thereby permitting counterfactuals highlighting the role of the three factors.
Keywords: geographic flow of bank funds; access to credit; bank competition; branch networks; economies of scope between deposits and loans
JEL Codes: L13; L51; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Number of branches in a county (R59) | Demand for deposits (E41) |
| Number of branches in a county (R59) | Cost of deposits (G21) |
| Number of branches in a county (R59) | Demand for loans (G21) |
| Number of branches in a county (R59) | Cost of loans (G21) |
| Total deposits (G21) | Demand for loans (G21) |
| Deposits and loans management efficiency (G21) | Economies of scope (D26) |