Entry of Foreign Banks and their Impact on Host Countries

Lehner, Maria and Schnitzer, Monika (September 2006): Entry of Foreign Banks and their Impact on Host Countries. Discussion Papers in Economics 2006-29

Abstract

Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare ffects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other.

• Item Type: Paper (Discussion Paper)
• Keywords: foreign bank entry, multinational bank, competition in banking, spillover effects
• Subjects: Economics; Economics > Discussion Papers in Economics
• Dewey Classification: 300 Social sciences; 300 Social sciences > 330 Wirtschaft
• Journal of Economic Literature classification: F37, G21, L13, O16
• Language: English