The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Synergies, and Local Competition
Victor Aguirregabiria, Robert Clark, Hui Wang
American Economic Review · 2025 · Volume 115 · Issue 6
Abstract
Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to high-loan-demand areas, limiting credit access. Using bank-county-year-level data, we provide evidence of geographic imbalance of deposits and loans and develop a methodology for investigating the contribution to this imbalance of branch networks, market power, and scope economies. Results are based on a novel measure of imbalance and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets. Counterfactual experiments show branch networks, scope economies, and local competition affect credit flow to disadvantaged markets.
Keywords
Index Numbers and Aggregation, leading indicators, Banks, Depository Institutions, Micro Finance Institutions, Mortgages, Financial Institutions and Services: Government Policy and Regulation, Oligopoly and Other Imperfect Markets, Other Spatial Production and Pricing Analysis
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