The banking sector and recovery in the EU economy

Date

2011-04-01

Advisors

Journal Title

Journal ISSN

ISSN

0027-9501

Volume Title

Publisher

Sage

Type

Article

Peer reviewed

Yes

Abstract

Banks within Europe have become larger and more international as Europe has moved towards a unified financial services market, but this trend has been reversed since the crisis. In order to establish the effect of these structural changes on output in Europe, we use a micro data set to investigate the impact of size (as measured by asset size) on banks’ net interest margins. We show that larger banks offer lower borrowing costs for firms, which raises sustainable output. We then use NiGEM to look at the impact of banks becoming smaller and moving back into their home territory. We investigate the impacts on output according to country size, showing that the effects are generally larger in small countries, and also larger in economies that are more dependent on bank finance for their business investment decisions.

Keywords: Net interest margins; bank size; European financial integration; growth; bank regulation

JEL Classifications: E44; G10; G28

Description

Keywords

Citation

Barrell, R., Fic, T., Gerald, J.F. et al. (2011) The Banking Sector and Recovery in the EU Economy. National Institute Economic Review, 216 (1), pp. R41–R52

Rights

Research Institute

Institute for Applied Economics and Social Value (IAESV)