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Comparative Economic Studies

, Volume 51, Issue 4, pp 467–499 | Cite as

The Determinants of Cross-Border Lending in the Euro Zone

  • Sylvia Heuchemer
  • Stefanie Kleimeier
  • Harald Sander
Symposium Paper

Abstract

We investigate the determinants of cross-border lending in the euro zone with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans, the study uses various specifications of gravity models, which are subsequently augmented by societal proxies. Although trade-theoretic and financial development reasoning can explain part of the surge in cross-border lending, we demonstrate that distance and borders still matter. Moreover, we identify cultural differences and different legal family origin as important barriers to further integration in the euro zone.

Keywords

cross-border loans banking market integration gravity model culture European single market 

JEL Classifications

C21 F34 F36 K20 Z10 

Notes

Acknowledgements

We benefited from comments by Evan Kraft, Paul Wachtel, Gerhard Winkler and two anonymous referees. We are grateful to the participants of the 14th Dubrovnik Economic Conference (Croatia National Bank, Dubrovnik, 25–28 June 2008, the 6th INFINITI Conference on International Finance (Trinity College Dublin, 9–10 June 2008), the International Seminar ‘International Financial Integration: Measures and Determinants’ (BBVA Foundation – Ivie, Valencia, 19 September 2008), and the Jubilee Conference on European Financial, Monetary and Fiscal Integration (Maastricht University, 3 December 2008).

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Copyright information

© Palgrave Macmillan 2009

Authors and Affiliations

  • Sylvia Heuchemer
    • 1
  • Stefanie Kleimeier
    • 2
    • 3
  • Harald Sander
    • 1
    • 3
  1. 1.Cologne University of Applied Sciences Claudiusstr.1KölnGermany
  2. 2.Limburg Institute of Financial Economics, Maastricht UniversityLM MaastrichtThe Netherlands
  3. 3.METEOR, Maastricht UniversityLM MaastrichtThe Netherlands

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