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This paper proposes a novel approach, based on probit framework, toward measuring bilateral synchronization, separately within business cycles and within financial cycles, for 11 eurozone economies. We find strong cross‐country synchronization both within real cycles and within financial cycles. Moreover, financial cycle synchronization dominates business cycle synchronization in the eurozone, especially after the introduction of the single currency. For some peripheral country pairs, we even find some evidence of 'decoupling' of business cycles relative to the core countries but majority of marginal business cycle effects do not change much before and after the common currency. The former observation supports the plea for more Europe‐wide macro‐prudential regulation whereas the latter observation gives ammunition to those economists who always stress that the euro zone architecture is an unfinished business and that the conditions for an optimum currency area are not fulfilled.

We study how information sharing between banks influences the geographical clustering of branches. We construct a spatial oligopoly model with price competition that explains why bank branches cluster and how the introduction of information sharing impacts clustering. Dynamic data on 59,333 branches operated by 676 banks in 22 countries between 1995 and 2012 allow us to test the hypotheses derived from this model. Consistent with our model, we find that information sharing spurs banks to open branches in localities that are new to them but that are already relatively well served by other banks. Information sharing also allows firms to borrow from more distant banks.

We study how information sharing between banks influences the geographical clustering of branches. We construct a spatial oligopoly model with price competition that explains why bank branches cluster and how the introduction of information sharing impacts clustering. Dynamic data on 59,333 branches operated by 676 banks in 22 countries between 1995 and 2012 allow us to test the hypotheses derived from our model. We find that information sharing spurs banks to open branches in localities that are new to them, but that are already well served by other banks. Information sharing also allows firms to borrow from more distant banks.

We study how information sharing between banks influences the geographical clustering of branches. We construct a spatial oligopoly model with price competition that explains why bank branches cluster and how the introduction of information sharing impacts clustering. Dynamic data on 59,333 branches operated by 676 banks in 22 countries between 1995 and 2012 allow us to test the hypotheses derived from our model. We find that information sharing spurs banks to open branches in localities that are new to them, but that are already well served by other banks. Information sharing also allows firms to borrow from more distant banks.