The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Synergies, and Local Competition

2025/05/30 by Vı́ctor Aguirregabiria, Robert L. Clark, Hui Wang · 1 voice
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Economic Theory and Policy #Housing, Finance, and Neoliberalism

paper · doi:10.1257/aer.20200374

openalex publication_date 2025/05/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/22

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. (JEL C43, G21, G28, L13, R32)

Citations

• Predicting Household Switching Behavior and Switching Costs at Depository Institutions
• On the measurement of inequality
• The Nature of the Firm
• Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations
• Precautionary Reserves and the Interbank Market
• Deposit Competition and Financial Fragility: Evidence from the US Banking Sector
• The Deposits Channel of Monetary Policy*

Discussions

• b) @vaguirregabiria.bsky.social, Clark & Wang, @aeajournals.bsky.social AER. US bank deposits and loans are geographically imbalanced. Branch networks transfer liquidity but flows are limited by depos [bsky, 2 points, 1 comments]

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