Skip to main content

Advertisement

SpringerLink
Log in

On the theory of international financial intermediation

  • Published:
De Economist Aims and scope Submit manuscript

Summary

The paper reviews and structures theoretical approaches to analyze the process of international financial intermediation. Most of them focus on the internationalization of banks and are not completely successful in their objective. A framework is developed for interpreting the emergence and existence of international financial intermediaries. As a result, some additional building blocks are given to construct a theory of international financial intermediation. Central elements herein are the existence of locational endowments and of market imperfections such as costs, asymmetric information, and regulation.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aliber, R.Z., 1976, ‘Toward a Theory of International Banking,’Economic Review, Federal Reserve Bank of San Francisco, Spring, pp. 5–8.

  • Aliber, R.Z., 1984, ‘International Banking,’Journal of Money, Credit, and Banking, 16, pp. 661–678.

    Google Scholar 

  • Allen, F., 1990, ‘The Market for Information and the Origin of Financial Intermediation,’Journal of Financial Intermediation, 1, pp. 3–30.

    Google Scholar 

  • Baltensperger, E. and J. Dermine, 1987, ‘Banking Deregulation in Europe,’Economic Policy, 4, pp. 63–109.

    Google Scholar 

  • Bennett, P., 1984, ‘Applying Portfolio Theory to Global Bank Lending,’Journal of Banking and Finance, 8, pp. 153–169.

    Google Scholar 

  • Brimmer, A.F. and F.R. Dahl, 1975, ‘Growth of American International Banking: Implications for Public Policy,’Journal of Finance, 30, pp. 341–363.

    Google Scholar 

  • Bryant, R.C., 1986, ‘International Financial Intermediation: Underlying Trends and Implications for Government Policies,’ in: Y. Suzuki and H. Yomo (eds.)Financial Innovation and Monetary Policy: Asia and the West, Tokyo, pp. 135–181.

  • Bryant, R.C., 1987,International Financial Intermediation, The Brookings Institution, Washington D.C.

    Google Scholar 

  • Carosio, G., 1990, ‘Problems of Harmonization of the Regulation of Financial Intermediation in the European Community,’European Economic Review, 34, pp. 578–586.

    Google Scholar 

  • Casson, M., 1989, ‘The Economic Theory of Multinational Banking — An Internalisation Approach,’ University of Reading Discussion Papers in International Investment and Business Studies 133.

  • Casson, M., 1990, ‘Evolution of Multinational Banks: A Theoretical Perspective,’ in: G. Jones (ed.),Banks as Multinationals, London and New York, pp. 14–29.

  • Cho, K.R., 1985, ‘Multinational Banks, their Identities and Determinants,’ Research in Business Economics and Public Policy, 8, Ann Arbor, Michigan.

  • Dean, J.W. and I.H. Giddy, 1981, ‘Strangers and Neighbors: Cross-Border Banking in North America,’Banco Nazionale del Lavoro Quarterly Review, 137, pp. 191–211.

    Google Scholar 

  • Deshmukh, S.D., S.I. Greenbaum and G. Kanatas, 1983, ‘Interest Rate Uncertainty and the Financial Intermediary's Choice of Exposure,’Journal of Finance, 38, pp. 141–147.

    Google Scholar 

  • Draper, D.W. and J.W. Hoag, 1978, ‘Financial Intermediation and the Theory of Agency,’Journal of Financial and Quantitative Analysis, 13, pp. 595–611.

    Google Scholar 

  • Dunning, J.H., 1981, ‘Explaining the International Direct Investment Position of Countries: Towards a Dynamic or Developmental Approach,’Welt wirtschaftliches Archiv, 117, pp. 30–64.

    Google Scholar 

  • Dunning, J.H., 1989, ‘Multinational Enterprises and the Growth of Services: Some Conceptual and Theoretical Issues,’Service Industries Journal, 9, pp. 6–39.

    Google Scholar 

  • Eaton, J., M. Gersovitz and J.E. Stiglitz, 1986, ‘The Pure Theory of Country Risk,’European Economic Review, 30, pp. 481–513.

    Google Scholar 

  • Fama, E.F., 1985, ‘What's Different About Banks?,’Journal of Monetary Economics, 15, pp. 29–39.

    Google Scholar 

  • Fieleke, N., 1977, ‘The Growth of U.S. Banking Abroad: An Analytical Survey,’ in:Key Issues in International Banking, Federal Reserve Bank of Boston, Boston.

    Google Scholar 

  • Freedman, C., 1977, ‘Micro Theory of International Financial Intermediation,’American Economic Review, 67, pp. 172–179.

    Google Scholar 

  • Gertler, M., 1988, ‘Financial Structure and Aggregate Economic Activity: An Overview,’Journal of Money, Credit, and Banking, 20, pp. 559–588.

    Google Scholar 

  • Giddy, I.H., 1983, ‘The Theory and Industrial Organization of International Banking,’ in: R.G. Hawkins, R.M. Levich and C.G. Wihlborg (eds.),The Internationalization of Financial Markets and National Economic Policy, Research in International Business and Finance, A Research Annual, 3, Greenwich/London, pp. 195–243.

  • Goldberg, L.G. and A. Saunders, 1980, ‘The Causes of US Bank Expansion Overseas—The Case of Great Britain,’Journal of Money, Credit, and Banking, 12, pp. 630–643.

    Google Scholar 

  • Goldberg, L.G. and A. Saunders, 1981a, ‘The Determinants of Foreign Banking Activity in the United States,’Journal of Banking and Finance, 5, pp. 17–32.

    Google Scholar 

  • Goldberg, L.G. and A. Saunders, 1981b, ‘The Growth of Organizational Forms of Foreign Banks in the U.S.,’Journal of Money, Credit, and Banking, 13, pp. 365–374.

    Google Scholar 

  • Goldsmith, R.W., 1969,Financial Structure and Development, New Haven and London.

  • Goodhart, C.A.E., 1987, ‘Why Do Banks Need a Central Bank?,’Oxford Economic Papers, 39, pp. 75–89.

    Google Scholar 

  • Gray, J.M. and H.P. Gray, 1981, ‘The Multinational Bank: A Financial MNC?,’Journal of Banking and Finance, 5, pp. 33–63.

    Google Scholar 

  • Grubel, H.G., 1977, ‘A Theory of Multinational Banking,’Banca Nazionale del Lavoro Quarterly Review, 123, pp. 349–363.

    Google Scholar 

  • Gurley, J.G. and E.S. Shaw, 1955, ‘Financial Aspects of Economic Development,’American Economic Review, 45, pp. 515–538.

    Google Scholar 

  • Gurley, J.G. and E.S. Shaw, 1960,Money in a Theory of Finance, with a Mathematical Appendix by A.C. Enthoven, The Brookings Institution, Washington D.C.

    Google Scholar 

  • Hellwig, M., 1991, ‘Banking, Financial Intermediation, and Corporate Finance,’ in: A. Giovannini and C. Mayer (eds.),European Financial Integration, Cambridge, pp. 35–63. Hultman, C.W., 1990,The Environment of International Banking, Englewood Cliffs, New Jersey.

  • Hultman, C.W. and L.R. McGee, 1989, ‘Factors Affecting the Foreign Banking Presence in the U.S.,’Journal of Banking and Finance, 13, pp. 383–396.

    Google Scholar 

  • Khoury, S.J., 1980,Dynamics of International Banking, New York.

  • Khoury, S.J., 1989, ‘The International Financial Centers: Developing the Competitive Edge,’ in: Y.S. Park and M. Essayyad (eds.),International Banking and Financial Centers, Dordrecht, pp. 67–82.

  • Kindleberger, C.P., 1974, ‘The Formation of Financial Centers: A Study in Comparative Economic History,’Princeton Studies in International Finance, 36, Princeton, New Jersey.

  • Kindleberger, C.P., 1976, ‘International Financial Intermediation for Developing Countries,’ in: R.I. McKinnon (ed.),Money and Finance in Economic Growth and Development-Essays in Honor of Edward S. Shaw, Business Economics and Finance, 8, New York and Basel, pp. 127–137.

  • Kindleberger, C.P., 1983, ‘International Banks as Leaders or Followers of International Business,’Journal of Banking and Finance, 7, pp. 583–595.

    Google Scholar 

  • Kindleberger, C.P., 1984,A Financial History of Western Europe, London.

  • Koszul, J.-P., 1970, ‘American Banks in Europe,’ in: C.P. Kindleberger (ed.),The International Corporation, Cambridge, pp. 273–289.

  • Lees, F.A., 1974,International Banking and Finance, London and New York.

  • Métais, J., 1979, ‘Le système financier international privé dans le déséquilibre monétaire international depuis 1974,’Revue Economique, 30, pp. 1017–1066.

    Google Scholar 

  • Monti, A., 1982, ‘Recent Trends in International Banking,’Journal of Banking and Finance, 6, pp. 389–399.

    Google Scholar 

  • Neave, E.H., 1991,The Economic Organisation of a Financial System, London and New York.

  • O'Hara, M., 1990, ‘Financial Contracts and International Lending,’Journal of Banking and Finance, 14, pp. 11–31.

    Google Scholar 

  • Pringle, J.J., 1974, ‘The Capital Decision in Commercial Banks,’Journal of Finance, 29, pp. 779–795.

    Google Scholar 

  • Pyle, D.H., 1971, ‘On the Theory of Financial Intermediation,’Journal of Finance, 26, pp. 737–747.

    Google Scholar 

  • Pyle, D.H., 1972, ‘Descriptive Theories of Financial Institutions under Uncertainty,’Journal of Financial and Quantitative Analysis, 7, pp. 2009–2029.

    Google Scholar 

  • Quinn, B.S., 1990, ‘US Investment Banks as Multinationals,’ in: G. Jones (ed.),Banks as Multinationals, London and New York, pp. 268–293.

  • Rugman, A.M., 1980, ‘Internalization as a General Theory of Foreign Direct Investment: A ReAppraisal of the Literature,’Weltwirtschaftliches Archiv, 116, pp. 365–379.

    Google Scholar 

  • Smith, R.C. and I. Walter, 1990,Global Financial Services, New York.

  • Stiglitz, J.E., 1991, ‘Government, Financial Markets and Economic Development,’ NBER Working Paper 3669.

  • Tobin, J., 1963, ‘Commercial Banks as Creators of “Money”,’ in: D. Carson (ed.),Banking and Monetary Studies, Homewood, Illinois, 1963, pp. 408–419.

  • Tobin, J., 1987, ‘Financial Intermediaries,’ in: J. Eatwell, M. Milgat and P. Newman (eds.),The New Palgrave, Money, London and Basingstoke, pp. 157–174.

  • Tobin, J. and W.C. Brainard, 1963, ‘Financial Intermediaries and the Effectiveness of Monetary Controls,’American Economic Review, 53, pp. 383–412.

    Google Scholar 

  • Tschoegl, A., 1987, ‘International Retail Banking as a Strategy: An Assessment,’Journal of International Business Studies, 18, pp. 67–88.

    Google Scholar 

  • Turner, P., 1991, ‘Capital Flows in the 1980s: A Survey of the Major Trends,’ BIS Economic Papers, No. 30.

  • Walter, I. and H.P. Gray, 1983, ‘Protectionism and International Banking, Sectorial Efficiency, Competitive Structure and National Policy,’Journal of Banking and Finance, 7, pp. 597–609.

    Google Scholar 

  • Wellons, P.A., 1976,Transnational Banks, United Nations, New York.

    Google Scholar 

  • Yannopoulos, G.N., 1983, ‘The Growth of Transnational Banking,’ in: M. Casson (ed.),The Growth of International Business, London, pp. 236–257.

Download references

Author information

Authors and Affiliations

  1. Department of Macroeconomics, University of Amsterdam, The Netherlands

    Lambertus J. R. Scholtens

Authors
  1. Lambertus J. R. Scholtens
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

Comments on earlier versions of this paper by M.M.G. Fase and two anonymous referees are gratefully acknowledged.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Scholtens, L.J.R. On the theory of international financial intermediation. De Economist 140, 470–487 (1992). https://doi.org/10.1007/BF01725240

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF01725240

Keywords

Search

Navigation