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FDI versus cross-border financial services: The globalisation of German banks

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  • Buch, Claudia M.
  • Lipponer, Alexander

Abstract

The choice between foreign direct investment (FDI) and exports has been a recurrent theme in the literature on international trade, yet few studies have analysed this choice at the level of the individual firm. This paper uses a new dataset to study the FDI-versus-exports decision for banks. We use data on the foreign direct investment stocks and the cross-border provision of financial services of German banks for the period 1997-2000 to describe the regional pattern of banks' international activities. We find that country- and bank-specific variables capturing size have a major impact on banks' foreign activities. The results are consistent with the hypothesis that the realisation of economies of scale and the provision of trade-related finance shape globalisation patterns. Greater cultural and geographical distance, by contrast, potentially limit the international expansion of banks. Our results also suggest that FDI and cross-border services are complements rather than substitutes.

Suggested Citation

  • Buch, Claudia M. & Lipponer, Alexander, 2004. "FDI versus cross-border financial services: The globalisation of German banks," Discussion Paper Series 1: Economic Studies 2004,05, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:1818
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    References listed on IDEAS

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    More about this item

    Keywords

    international banking; gravity equations; foreign direct investment; cross-border financial services;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F0 - International Economics - - General

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