Are competitive banking systems more stable?
Are competitive banking systems more stable?
Using the Panzar and Rosse H-statistic as a measure of competition in 45 countries, we find that more competitive banking systems are less prone to experience a systemic crisis and exhibit increased time to crisis. This result holds even when we control for banking system concentration, which is associated with higher probability of a crisis and shorter time to crisis. Our results indicate that competition and concentration capture different characteristics of banking systems, meaning that concentration is an inappropriate proxy for competition. The findings suggest that policies promoting competition among banks, if well executed, have the potential to improve systemic stability.
C41, G21, G28, L11
711-734
Schaeck, Klaus
1f6f6cb6-544e-45e9-8ab2-00c99410372e
Cihak, Martin
709f3e57-e4a9-44f5-8fbd-ed3aa7d1b282
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
June 2009
Schaeck, Klaus
1f6f6cb6-544e-45e9-8ab2-00c99410372e
Cihak, Martin
709f3e57-e4a9-44f5-8fbd-ed3aa7d1b282
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Schaeck, Klaus, Cihak, Martin and Wolfe, Simon
(2009)
Are competitive banking systems more stable?
Journal of Money, Credit & Banking, 41 (4), .
(doi:10.1111/j.1538-4616.2009.00228.x).
Abstract
Using the Panzar and Rosse H-statistic as a measure of competition in 45 countries, we find that more competitive banking systems are less prone to experience a systemic crisis and exhibit increased time to crisis. This result holds even when we control for banking system concentration, which is associated with higher probability of a crisis and shorter time to crisis. Our results indicate that competition and concentration capture different characteristics of banking systems, meaning that concentration is an inappropriate proxy for competition. The findings suggest that policies promoting competition among banks, if well executed, have the potential to improve systemic stability.
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Published date: June 2009
Keywords:
C41, G21, G28, L11
Organisations:
Management
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Local EPrints ID: 153745
URI: http://eprints.soton.ac.uk/id/eprint/153745
ISSN: 0022-2879
PURE UUID: 8ada7f21-fa8f-4775-8231-142612800c76
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Date deposited: 21 May 2010 08:49
Last modified: 14 Mar 2024 02:36
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Author:
Klaus Schaeck
Author:
Martin Cihak
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