German Bank Lending to Industrial and Non-Industrial Countries : Driven by Fundamentals or Different Treatment

This paper shows that the substantial disparity in German bank lending towards industrial and non-industrial (Non-IC) countries is largely explained by differences in countries' endowments and only to a minor extent by German banks' different treatment of these country groups. This is demonstrated by applying a decomposition technique to an augmented gravity model that is estimated for German foreign lending using a new micro panel data-set individual claims from the Deutsche Bundesbank covering the period from 1996 to 2002