Article Dans Une Revue Journal of International Money and Finance Année : 2018

The Distance Effect in Banking and Trade

Michael Brei
Goetz von Peter
  • Fonction : Auteur

Résumé

The empirical gravity literature finds geographical distance to be a large and growing obstacle to trade, contradicting the popular notion that globalization heralds "the end of geography". This distance puzzle disappears, however, when measuring the effect of cross-border distance relative to that of domestic distance (Yotov, 2012). We uncover the same result for banking when comparing cross-border positions with domestic credit, using the most extensive dataset on global bank linkages between countries. The role of distance remains substantial for trade as well as for banking where transport cost is immaterial - pointing to the role of information frictions as a common driver. A second contribution is to show that the forces of globalization are also evident in other, less prominent, parts of the gravity framework.

Dates et versions

hal-01616316 , version 1 (13-10-2017)

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Michael Brei, Goetz von Peter. The Distance Effect in Banking and Trade. Journal of International Money and Finance, 2018, 81, pp.116-137. ⟨10.1016/j.jimonfin.2017.10.002⟩. ⟨hal-01616316⟩
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