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Big Banks and Macroeconomic Outcomes: Theory and Cross-Country Evidence of Granularity
Does the mere presence of big banks affect macroeconomic outcomes? We develop a theory of granularity for the banking sector by modeling heterogeneous banks charging variable markups. Using data for a large set of countries, we show that the banking sector is indeed "granular," as the righ...
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Published in: | Journal of money, credit and banking credit and banking, 2018-12, Vol.50 (8), p.1785-1825 |
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Main Authors: | , , , |
Format: | Article |
Language: | English |
Subjects: | |
Citations: | Items that this one cites Items that cite this one |
Online Access: | Get full text |
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Summary: | Does the mere presence of big banks affect macroeconomic outcomes? We develop a theory of granularity for the banking sector by modeling heterogeneous banks charging variable markups. Using data for a large set of countries, we show that the banking sector is indeed "granular," as the right tail of the bank size distribution follows a power law. We demonstrate empirically that the presence of big banks, measured by a high degree of market concentration, is associated with a positive and significant relationship between bank-level credit growth and aggregate growth of credit or GDP. |
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ISSN: | 0022-2879 1538-4616 |
DOI: | 10.1111/jmcb.12545 |