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Integrating with their Feet: Cross-Border Lending at the German-Austrian Border

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  • Jarko Fidrmuc
  • Christa Hainz

Abstract

The financial integration in Europe concentrates on cross-border mergers rather than cross-border lending and emphasizes the need for harmonizing bank regulation and supervision. We study the impact of cross-border lending in a theoretical model where banks acquire either hard or soft information of borrowing firms. We test the model’s predictions using the ifo business climate survey that reports the perceptions of German firms’ credit availability between 2003 and 2006. Our results show that distance matters for cross-border lending, especially for the SMEs. In contrast to the policy of harmonization, differences in bank regulations may have speeded up the cross-border lending.

Suggested Citation

  • Jarko Fidrmuc & Christa Hainz, 2008. "Integrating with their Feet: Cross-Border Lending at the German-Austrian Border," CESifo Working Paper Series 2279, CESifo.
    • Handle: RePEc:ces:ceswps:_2279
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    References listed on IDEAS

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    Cited by:

    1. Reint Gropp & Anil K Kashyap, 2010. "A New Metric for Banking Integration in Europe," NBER Chapters, in: Europe and the Euro, pages 219-246, National Bureau of Economic Research, Inc.
    2. Anselm Mattes & Julia Spies, 2009. "Außenwirtschaftliche Verbindungen der deutschen Bundesländer zur Republik Österreich," IAW Discussion Papers 49, Institut für Angewandte Wirtschaftsforschung (IAW).
    3. Jarko Fidrmuc & Christa Hainz, 2008. "Grenzüberschreitende Kreditvergabe: Das Beispiel von Deutschland und Österreich," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 61(23), pages 25-29, December.
    4. Michael Boss & Martin Fenz & Johannes Pann & Claus Puhr & Martin Schneider & Eva Ubl, 2009. "Modeling Credit Risk through the Austrian Business Cycle: An Update of the OeNB Model," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 17, pages 85-101.

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    More about this item

    Keywords

    financial integration; SMEs; banking supervision; business surveys; threshold analysis;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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