bank competition and ecb s monetary policy in a model of oligopolistic competition in the banking sector we analyse how the monetary policy rule chosen by the central bank can influence the incentive of banks to set high interest rates on loans over the business cycle we exploit the basic model to investigate the potential impact of emu implementation on collusion among banks in particular we consider the possible eaects of the european central bank s policy criteria with regard to the cost of credit in national markets 2000 elsevier science b v all rights reserved

x efficiency in australian banking an empirical investigation this paper empirically investigates the x eaciency technical and allocative in australian banks a non parametric method of data envelopment analysis dea has been used to arrive at the eaciency scores banks in this sample were found to have low levels of overall eaciency compared with the banks in the european countries and in the us the results indicate that as a source of overall ineaciency the technical component was more important than the allocative component thus the ineaciency in australian banks can be attributed to wasting of inputs technical ineaciency rather than choosing the incorrect input combinations allocative ineaciency domestic banks were found to be more eacient than foreign owned banks the study has important implications such as guiding the government policy regarding deregulation and mergers since the study pinpoints the sources of ineaciency it would also help banks with strategic planning 2001 elsevier science b v all rights reserved

bank consolidation and the dynamics of consumer loan interest rates this paper analyzes interest rates quoted by individual banks for personal and automobile loans in 10 cities personal loan rates are higher in concentrated markets and banks involved in mergers reduce personal rates relative to their competitors prior to the merger s completion this is consistent with mergers changing the size structure of personal loan markets and merger participants desire to gain regulatory approval auto rates are unaffected by local concentration and mergers suggesting that their market is nationwide rates for both loan types respond asymmetrically to changes in treasury rates being more sensitive to a rise than a fall

a test of the law of one price in retail banking this paper investigates the level and the determinants of retail banking interest rate differences among spanish banks in the period 1989 2003 we find that the interest rates of twenty five different bank loan and deposit products adjust rather rapidly to their long term values in response to external shocks as the relative version of the law of one price predicts but the evidence runs contrary to the absolute version of the law credit risk premium part of the marginal cost of the loans granted by a particular bank is an important source of interest rate dispersion across banks and loan products both before and after spain joined the euro zone therefore differences in credit risk policies across banks must be taken into account when forming expectations about european retail banking integration

evaluation of the influence of agricultural price policy on cotton production in cote d ivoire abstract in this paper the impact of the cotton pricing policy of the marketing board of cote d ivoire is investigated a theoretical model is developed to derive the price level which maximizes revenue generated from the marketing board s cotton transactions a dynamic cotton supply function was estimated and used to compute elasticities the estimates indicate that farmers in the country response to price changes and that the pricing policy of the marketing board has been consistent with an objective of generating revenue for the government

drexel burnham lambert s bankruptcy and the subsequent decline in underwriter fees abstract in the 1980s drexel burnham lambert dominated the underwriting of junk bonds with close to a 50 market share in 1990 drexel went bankrupt and was liquidated and the percentage underwriting fees for junk bonds subsequently dropped dramatically we present strong evidence that the exit of drexel burnham lambert and the resulting increase in competition for market share were major contributing factors to the decline in junk bond underwriter fees

the price concentration relationship in banking the commonly observed positive correlation between market concentration and profitability may be explained by noncompetitive pricing behavior as argued by the structure performance hypothesis or by the greater efficiency of firms with dominant market shares as argued by the efficient structure hypothesis by examining the price concentration relationship instead of the profit concentration relationship this paper tests the structure performance hypothesis in a manner that excludes the efficient structure hypothesis as an alternative explanation of the results the results strongly support the structure performance hypothesis and are robust with respect to model specification measurement of concentration and econometric technique copyright 1989 by mit press

bank mergers and crime the real and social effects of credit market competition using a unique sample of commercial loans and mergers between large banks we provide micro level within county evidence linking credit conditions to economic development and find a spillover effect on crime neighborhoods that experience more bank mergers are subject to higher interest rates diminished local construction lower prices an influx of poorer households and higher property crime in subsequent years the elasticity of property crime with respect to merger induced banking concentration is 0 18 we show that these results are not likely due to reverse causation and confirm the central findings using state branching deregulation to instrument for bank competition we examine the real and social impact of local credit competition by documenting a link between the competitiveness of the local banking market credit conditions urban development and crime several recent studies peek and rosengren 2000 cetorelli and gambera 2001 klein peek and rosengren 2002 and burgess and pande 2003 tie credit market imperfections to diminished real economic activity and growth other studies connect the economic environment to property crime freeman 1999 levitt 2001 raphael and winter ebmer 2001 and nilsson 2004 it is reasonable to hypothesize therefore that reductions in bank competition may lead to economic decline and subsequently increases in property crime we empirically investigate the effects of bank consolidation and increased market power on credit availability and real activity using a unique sample of commercial loans and mergers between large banks in the 1990s we provide micro level evidence that garmaise is from the ucla anderson school and moskowitz is from the graduate school of business university of chicago and nber we have benefited from the suggestions and comments of tony bernardo marianne bertrand phillip bond doug diamond mark duggan eugene fama

domestic and international determinants of bank profits foreign banks in australia abstract this paper develops and tests a model that integrates the existing multinational bank literature with the domestic bank profits literature using data for australia this paper demonstrates that an integrated model results in a small increase in explanatory power when compared to models drawn solely from the multinational banking literature the paper finds that profits are a negative function of competitor market share and bank licence status and a positive function of australian size and home gdp growth it is argued that there is incomplete integration between the market segments of domestic and multinational banks due to the first mover advantages of incumbent banks

a note on the risk adjusted price concentration relationship in banking abstract price concentration studies in banking typically find a significant and negative relationship between consumer deposit rates i e prices and market concentration this implies highly concentrated banking markets are bad for depositors it also provides support for the structure conduct performance hypothesis and rejects the efficient structure hypothesis however these studies have focused almost exclusively on supply side control variables and neglected demand side variables when estimating the reduced form price concentration relationship for example previous studies have not included in their analysis bank specific risk variables as measures of cross sectional derived deposit demand we find that when bank specific risk variables are included in the analysis the magnitude of the relationship between deposit rates and market concentration decreases by over 50 we offer an explanation for these results based on the correlation between a bank s risk profile and the structure of the market in which it operates these results suggest that it may be necessary to reconsider the well established assumption that higher market concentration necessarily leads to anticompetitive deposit pricing behavior by commercial banks this has direct implications for the antitrust evaluations of bank merger and acquisition proposals by regulatory agencies and in a more general sense these results suggest that any structure conduct performance based study that does not explicitly consider the possibility of very different risk profiles of the firms analyzed may indeed miss a very important set of explanatory variables and thus the results from those studies may be spurious

risk premium and market power in credit markets abstract the use of credit risk adjusted marginal opportunity cost of funds in the computation of the lerner index for bank loans opens new directions to properly evaluate market power of banks in credit markets beyond disputed concentration measures

bank commercial loan markets and the role of market structure evidence from surveys of commercial lending abstract this paper seeks to test two tenets that underlie the current practice of antitrust analysis in banking the first is the view that bank commercial loan markets are local in nature and the second is the view that banks in more concentrated markets are more likely to engage in some form of noncompetitive behavior tests of both of these tenets are conducted using an extensive set of loan specific survey information not previously employed to address these issues results consistent with the existence of local banking markets and the dominance of competitive differences as an explanation for observed differences in loan rates are found

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

a test of whether millet acreage in niger is determined by official or private market prices niger has two separate marketing channels for grain one is the official system operated by the government the other is a parallel channel of private traders researchers or policy makers wanting to study effects of price policies on producers are faced with two sets of prices this paper seeks to answer the question which prices matter non nested hypothesis tests are conducted for millet acreage response equations the results show that prices from the larger private market are the prices that matter

deposit spreads and the welfare cost of inflation abstract high nominal interest rates are associated with high deposit spreads which is consistent with a model where banks have monopoly power and currency and deposits are substitutes therefore higher interest rates raise the implicit price of banking services increase bank profits and attract entry into the banking sector taking these effects into account a one percentage point increase in inflation has a welfare cost of 0 083 of gdp 6 7 times higher than traditional estimates

competition in banking and the lending channel evidence from bank level data in asia and latin america abstract this paper examines how banking competition affects the transmission of monetary policy through the bank lending channel we apply a two step estimation procedure using bank level panel data for commercial banks in 10 asian and 10 latin american countries during the period from 1996 to 2006 in the first step we measure the degree of banking competition by applying the methodology proposed by panzar and rosse 1987 in the second step we estimate a loan growth equation where the explanatory variables include the panzar rosse measure of banking competition the estimation results provide consistent evidence that increased competition in the banking sector weakens the transmission of monetary policy through the bank lending channel this is especially true for banks in latin american countries and banks of small size low liquidity and low capitalization we also discuss the policy implications of the main findings of this paper

the value of risk measuring the service output of u s commercial banks rather than charging direct fees banks often charge implicitly for their services via interest spreads as a result much of bank output has to be estimated indirectly in contrast to current statistical practice dynamic optimizing models of banks argue that compensation for bearing systematic risk is not part of bank output we apply these models and find that between 1997 and 2007 in the u s national accounts on average bank output is overestimated by 21 percent and gdp is overestimated by 0 3 percent moreover compared with current methods our new estimates imply more plausible estimates of the share of capital in income and the return on fixed capital

competition and collusion in dealer markets this article develops a game theoretic model to analyze market makers intertemporal pricing strategies we show that dealers who adopt noncooperative pricing strategies may set bid ask spreads above competitive levels this form of implicit collusion differs from explicit collusion where dealers cooperate to fix prices price discreteness or asymmetric information are not required for collusion to occur rather institutional arrangements that restrict access to the order flow are important determinants of the ability to collude because they reduce dealers incentives to compete on price public policy efforts to increase interdealer competition should focus on such restrictions

ghatak subrata and ken ingersent agriculture and economic development baltimore md johns hopkins university press 1984 380 pp 27 50 10 95 paper

firm growth and efficiency in the banking industry a new test of the efficient structure hypothesis abstract in this paper we propose a new test of the efficient structure es hypothesis which predicts that efficient firms come out ahead in competition and grow as a result our test has significant advantages over existing ones because it is more direct and can jointly test the so called quiet life hypothesis which predicts that in a concentrated market firms do not minimize costs we then apply this test to large banks in japan consistent with the es hypothesis we find that more efficient banks become larger we also find that market concentration reduces banks efficiency which supports the quiet life hypothesis these findings imply that there is an intriguing growth efficiency dynamic throughout banks life cycle although our findings also suggest that the es hypothesis dominates the quiet life hypothesis in terms of economic impact

the economic and poverty impacts of maize research in west and central africa this article assembles the results of three multicountry surveys on variety performance and adoption patterns to measure the impacts of maize research in west and central africa from 1981 to 2005 and uses cost data since 1971 to compute social rates of return on public investments in maize research in the region adoption of modern varieties increased from less than 5 of the maize area in the 1970s to about 60 in 2005 yielding an aggregate rate of return on research and development r d investment of 43 the estimated number of people moved out of poverty through adoption of new maize varieties rose gradually in the 1980s to more than one million people per year since the mid 1990s over half of these impacts can be attributed to international maize research at iita and cimmyt the article concludes with a discussion of strategic options to enhance the impacts of maize research in the region

innovative vs imitative r d and economic growth abstract this paper develops a multi sector dynamic general equilibrium growth model in which innovation improves product quality and imitation expands product variety and both innovation and imitation can occur simultaneously in the same sector within the analytical framework so developed we show that i subsidizing innovation and taxing imitation are not necessarily equivalent in terms of their effects on imitation ii an innovation subsidy always speeds up economic growth while an imitation subsidy always does the opposite and iii the welfare effects of both innovation and imitation subsidies are ambiguous

bank capital and liquidity creation in asia pacific we calculate liquidity creation for a large sample of commercial banks in 14 asia pacific economies from 2005 to 2012 we find that banks in this region created 7 83 trillion in liquidity in 2012 or approximately 3 24 times the total liquidity created in 2005 large banks and those based in developing asia created the highest liquidity we also investigate the bicausal relationship between liquidity creation and regulatory capital and find that the trade off between the benefits of financial stability induced by enhanced capital requirements and those of higher liquidity creation is applicable to all of the sample banks regardless of bank size and economic region

on the relationship among efficiency capitalization and risk does management matter in local banking market abstractby employing a granger causality methodology in a panel data framework this article explores the relationship among efficiency capitalization and credit risk within the local italian banking system focusing the attention on cooperative banks we specifically test whether managers take more risks in highly concentrated markets i e monopoly than in partially competitive markets i e duopoly the evidence shows that in more concentrated markets management efficiency generates a decrease in risk taking rejecting the bad management hypothesis with respect to the partially competitive markets results are consistent with the idea that banks with less local competition are able to increase their profits by indulging more freely in rent seeking behaviour minimizing their risk taking and consequently improving the quality of their assets through additional screening processes the financial crisis does not seem to affect the conduct of management in terms of bank investment decisions and risk

competition transmission and bank pricing policies evidence from belgian loan and deposit markets abstract this paper addresses the pass through from market interest rates to retail bank interest rates the paper advocates a heterogeneous approach and applies it to the belgian banking market a substantial proportion of the heterogeneity in bank pricing policies can be explained by the bank lending channel and the relative market power hypothesis the results also suggest that the long term pass through is typically less than one for one rejecting the completeness hypothesis while there is no convincing evidence for asymmetry in retail rates large deviations from equilibrium mark ups are faster reduced than small deviations overall conditions for corporate loans are more competitive compared to consumer loans demand and savings deposits have by far the most rigid prices

the deposits channel of monetary policy we propose and test a new channel for the transmission of monetary policy we show that when the fed funds rate increases banks widen the interest spreads they charge on deposits and deposits ow out of the banking system we present a model in which imperfect competition among banks gives rise to these relationships an increase in the nominal interest rate increases banks market power inducing them to increase deposit spreads and hence restrict deposit supply households respond to the increase in deposit prices by substituting from deposits into less liquid but higheryielding assets consequently changes in the nominal interest rate aect banks cost of capital and lending using branch level data on the universe of u s banks we show that following an increase in the fed funds rate deposit spreads increase by more and supply falls more in areas with less deposit competition we control for changes in banks lending opportunities by comparing branches of the same bank we control for changes in macroeconomic conditions by showing that deposit spreads widen immediately after a rate change and even if this change is fully anticipated our results imply that monetary policy has a signicant impact on how the nancial system is funded on the quantity of safe and liquid assets it produces and on its provision of loans to the real economy

do consumers pay for one stop banking evidence from an alternative revenue function abstract in providing financial services jointly banks may reduce costs due to complementarities in production cost economies of scope or raise revenues from complementarities in consumption revenue economies of scope cost economies of scope between bank deposits and loans have been found to be small revenue economies of scope are investigated here for the first time and found to be insignificant over 1978 1990 for both small and large banks and for those on or off the revenue efficient frontier the lack of complementarities between deposits and loans where benefits are most likely to occur suggests that claims of important synergies from an expansion of banking powers be taken with caution

do regulators read the literature bank merger regulation 1963 1990 during the early 1980s a series of events occurred that altered the regulatory political and scholarly underpinnings of bank merger regulation new laws that deregulated financial institutions increased actual and potential competition in banking markets consistent with the laissez faire spirit of this deregulation the reagan justice department relaxed its enforcement of the merger antitrust laws new banking cost studies produced lower estimates of optimal bank scale suggesting that small banks might be more effective rivals of large full service banks than previously thought new studies in industrial organization began to question the traditional notion that concentration and collusion are the root causes of excess profits weakening one of the primary justifications for denying mergers of banks and nonbanks alike this paper explores whether the federal reserve board of governors commercial bank merger policy changed around 1980 and whether these changes were consistent with contemporaneous regulatory political and scholarly developments the determinants of the board s merger policy both before and after the early 1980s are estimated using a binomial probit model the results suggest that the board revised its overall merger policy consistent with changes in the justice department s merger guidelines but was only marginally influenced by changes in the banking cost and industrial organization literature although merger policy became more relaxed as reagan appointees were added to the board the possibility that this loosening was a response to the increased competition in financial markets could not be dismissed

branch banking and the geography of bank pricing we show that bank branching tends to mitigate localized market power by broadening the geographic scope of competition among banks even though branch banking allows banks to differentiate themselves through their choices of branch locations banking services at peripheral locations will be priced more competitively when those locales are served by branch networks we develop a theoretical model in support of this view and offer empirical evidence

quality ladders and product cycles we develop a two country model of endogenous innovation and imitation in order to study the interactions between these two processes firms in the north race to bring out the next generation of a set of technology intensive products each product potentially can be improved a countably infinite number of times but quality improvements require the investment of resources and entail uncertain prospects of success in the south entrepreneurs invest resources in order to learn the production processes that have been developed in the north all r d investment decisions are made by forward looking profit maximizing entrepreneurs the steady state equilibrium is characterized by constant aggregate rates of innovation and imitation we study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

commercial lending and distance evidence from community reinvestment act data a number of large banking organizations have substantially broadened the distances at which they are willing to extend commercial loans but there is also evidence to suggest that this has occurred primarily at the high side of the distribution of lending distances in this paper we employ a new source of data to examine the relationship between lending decisions and distance between lender and borrower for that part of the distance distribution where arguably most of the competitive interactions among lenders still occur we report three basic findings 1 distance operates as a deterrent to lending even within areas traditionally defined as local markets 2 distance is more of a deterrent for small banks than for larger organizations even within these areas and 3 for those commercial loans made within areas currently treated by regulators as markets distance has not been declining in importance indeed a preponderance of the evidence suggests that it is becoming if anything more of a factor possible explanations and policy implications are discussed

food prices and market structure in sweden this paper examines retail grocery price levels across a large panel of stores in sweden we explain price variation across stores by market structure variables to capture differences in competition intensity and a number of store and region specific factors most of the explained variation in prices can be attributed to store specific factors such as size and chain affiliation overall the relation between market structure variables and food prices is weak and effects are small in percentage terms nevertheless higher local concentration of stores higher regional wholesaler concentration and a lower market share of large stores are all correlated with higher prices

fairly priced deposit insurance and bank charter policy the thrust of current deposit insurance reform risk based insurance premiums and capital requirements is an effort to price deposit insurance more fairly fairly pricing deposit insurance eliminates inequitable wealth transfers but it does not lead to an efficient equilibrium this paper shows that an alternative charter policy results in an efflcient separating equilibrium this article analyzes the effect of alternative charter policies when deposit insurance is fairly priced the thrust of current deposit insurance reformrisk based capital requirements 1988 and risk based insurance premiums 1994 is an effort to price deposit insurance more fairly chan greenbaum and thakor s 1992 seminal paper dramatically illustrated that fairly pricing deposit insurance is not enough to solve the deposit insurance problem in their model when banks hold nontraded private information assets no equilibrium exists with fairly priced deposit insurance unless banks earn rent or are subsidized fairly pricing deposit insurance eliminates inequitable transfers of wealth but it does not lead to an efficient equilibrium this paper shows that an alternative charter policy gives an efficient separating equilibrium the separating equilibrium segregates the market for insured transactions deposits from private information financial intermediation the analysis in this article provides support for the deposit insurance reform proposal in the recent 1993 national commission on financial institution reform recovery and enforcement ncfirre report to the president and congress and for merton and bodie s 1993 proposal both proposals impose a separating equilibrium that isolates insured transactions accounts and the public information traded assets that secure them from private information assets in the bank s portfolio the formal model developed here is designed to demonstrate the effect of charter policy on the efficiency of market equilibrium in an uncomplicated setting but the main result that a separating equilibrium is more efficient is extremely robust with respect to the model specification the model has two types of financial intermediaries intermediaries that hold nontraded private

the immediate challenges for the european central bank immediate challenges for the ecb issues in formulating a single monetary policy this paper discusses a number of issues that the newly constituted board of the ecb will face early on conducting a european monetary policy will be very different from living under the protective umbrella of the bundesbank we discuss voting on the ecb board and argue that the ability to communicate with the public will be critical for the success of the new institution we also ask how a single monetary policy a common change in the interest rate controlled by the ecb is transmitted to the economy of each member country we show that the monetary process differs significantly inside emu initially at least the cost of a disinflation episode could fall disproportionately on a few member countries those with both a financial structure that spreads a monetary contraction widely and a wage price structure that is relatively inflexible this process moreover is sure to evolve in part as a result of financial industry restructuring already under way but in part accentuated by the common money furthermore as the lucas principle suggests the wage price process itself will adapt to the changing focus of european monetary policy rudi dornbusch carlo favero and francesco giavazzi

the competitive role of credit unions in small local financial services markets although there is a considerable literature on the role of market structure in banking markets no attention has been given to the impact of the competitive discipline provided by credit unions on consumer credit rates offered by banks after presenting a theoretical framework for understanding the impact credit unions should be expected to have this article analyzes a pooled cross sectional time series sample with roughly 1 000 observations on relatively small united states markets with the focus on explaining bank rates for two types of consumer loans results confirm the previously observed role of market structure and suggest a significant role for credit unions in disciplining the exercise of market power by banks

maize acreage response under differential prices in the republic of benin west africa price response of maize acreage in benin was estimated with a particular emphasis on whether the prices were producer prices in rural markets or retail prices in urban markets a second difference between prices was examined through a price adjustment model which takes into account the distortions caused by local units on maize price when one is concerned with the pricing system in the private marketing network relating rural and urban areas urban market price specification appeared to be the most relevant statistically in explaining acreage decisions in mono province price elasticity of acreage was 0 445 in this area while its value around 0 10 was not significant for benin as a whole the use of adjusted urban prices enabled an increase of 5 6 of the elasticity in mono province the urban vs rural difference was apparent but the coefficients of the price variable were not significant in equations with rural prices the latter were not as reliable as those of the urban market of dantokpa in cotonou city collected by the institute of statistics insae and the gtz project

retail bank deposit pricing an intertemporal asset pricing approach fundamentally spreads between market and deposit interest rates increase when interest rates rise and decline when rates fall recent empirical studies have found this phenomenon to be related to market concentration static equilibrium models are poorly equipped to explain this behavior in this paper the author applies an intertemporal asset pricing model incorporating bank deposits as a form of money in order to analyze the pricing behavior of a banking sector exercising market power his results extend the theoretical literature on deposit pricing and provide some insights into the behavior of interest rate spreads through time copyright 1995 by ohio state university press

the price concentration relationship in banking a reply berger allen n and timothy h hannon the price concentration relationship in banking this review 71 may 1989 291 299 demsetz harold industry structure market rivalry and public policy journal of law and economics 16 apr 1973 1 9 jackson william e iii market structure and price adjustments evidence from the banking industry unpublished ph d dissertation university of chicago june 1989 peltzman samuel the gains and losses from industrial concentration journal of law and economics 20 oct 1977 229 263 salinger michael the concentration margins relationship reconsidered in brookings papers on economic activity microeconomics martin n bailey and clifford winston eds brookings washington d c brookings institution 1990 5 no formal statistical tests of the differences in the estimated coefficients of conc across subsamples were conducted this analysis was concerned more with the sign and significance level of each subsample estimated conc coefficient

regulations market structure institutions and the cost of financial intermediation this paper examines the impact of bank regulations market structure and national institutions on bank net interest margins and overhead costs using data on over 1400 banks across 72 countries while controlling for bankspecific characteristics the data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation inflation also exerts a robust positive impact on bank margins and overhead costs while concentration is positively associated with net interest margins this relationship breaksdownwhencontrolling for regulatory impediments to competition and inflation furthermore bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection while these institutional indicators robustly explain cross bank net interest margins and overhead expenditures thus bank regulations cannot be viewed in isolation they reflect broad national approaches to private property and competition

multimarket contact competition and pricing in banking abstract in this paper we assess the impact of multimarket contact of banks on their market power by means of a simultaneous equation model in which the divergence of price from marginal cost is a function of multimarket linkages the model is estimated using aggregate data from the italian regions for the years 1997 2009 our results show that multimarket contact is positively and significantly correlated to the market power index and is also connected to both home and non home market concentration the evidence is robust to changes in model specification and multimarket contact measures and supports the idea that firms which have a greater amount of contact are more likely to collude

collusion over the business cycle we present a theory of collusive pricing for markets in which demand alternates stochastically between fast growth boom and slow growth recession phases we show that 1 the most collusive prices are weakly procyclical countercyclical when demand growth rates are positively negatively correlated through time and 2 the amplitude of the collusive pricing cycle is larger when the expected duration of boom phases decreases and when the expected duration of recession phases increases we also offer a generalization of rotemberg and saloner s 1986 model interpreting their findings in terms of transitory demand shocks that occur within broader business cycle phases

poder de mercado intermediacion financiera y banca un enfoque de organizacion industrial this article provides an exploratory analysis of the process for determining intermediation margins in the peruvian banking system in the period between 2001 and 2010 this process was influenced primarily by two occurrences the international financial crises towards the end of the 1990s and the application of the financial system consolidation program programa de consolidacion del sistema financiero in peru the analysis delivers some evidence that in the case of peruvian banking market power and specifically the existence of market power related inequalities between banks may be relevant factors in the process of determining financial intermediation margins

the cyclicality of price cost margins in banking an empirical analysis of its determinants i introduction in this paper we study the cyclical behavior of price cost margins in banking calculated as the difference between the interest rate on loans and deposits using time series quarterly data for the period 1979 2005 in the united states this cyclical behavior of banks price cost margins a key fact about business fluctuations has received little attention before dueker and thornton 1997 find evidence that in cyclical downturns banks opt for a relatively high price cost margin however they focus exclusively on the markup of the bank prime lending rate over the marginal cost of funds for banks mandelman 2006 presents evidence on the cyclicality of margins for a large sample of countries and uses foreign bank penetration to explain the behavior of margins 1 in olivero 2005 aliaga diaz 2006 and aliaga diaz and olivero 2010a we document the countercyclicality of banks price cost margins in the united states in that paper we do so using an atheoretical methodology based on var forecast errors to measure comovement between variables 2 in this paper we build on this atheoretical evidence and take a step further by constructing an empirical model of the determinants of the cyclical behavior of margins here we take a theory based approach to decide on the inclusion of the relevant regressors that belong to this model doing so allows us to contribute to the literature by providing potential explanations for the previously documented countercyclical nature of margins monetary policy and credit risk could be suggested as the main and potentially the only determinants of the cyclical behavior of margins on the one hand the bank lending channel of monetary transmission predicts that the federal funds rate as a monetary policy indicator and margins are directly related therefore if policy rates exhibit a particular cyclical behavior not controlling for monetary policy could bias the estimations on the cyclical behavior of margins on the other hand credit risk is expected to be countercyclical and to raise margins so that default should help explain the countercyclicality of the latter based on these two observations our empirical methodology consists of two steps in a first step we test whether the negative and significant contemporaneous sample correlations between margins and a business cycle indicator are robust to the inclusion of controls related to monetary policy default risk and banking regulation results show it is so that there seems to be other channels through which fluctuations in the economy give rise to the observed countercyclicality of margins in a second step we look for these channels and offer several potential explanations for the observed behavior interest rate risk the economy s financial depth banks liquidity and capitalization and the share of total assets held by large banks all exert a significant impact on the behavior of margins over the business cycle these conclusions are consistent across alternative definitions of the margins and the business cycle indicator our work is linked to two strands of research in macroeconomics first our countercyclicality results are linked to the large literature on countercyclical markups in goods markets and its effects on aggregate demand started by rotemberg and saloner 1986 and rotemberg and woodford 1992 second price cost margins that vary endogenously and countercyclically in response to the state of the economy are a necessary condition for the existence of a financial accelerator as an amplifier of business fluctuations see for example bernanke and gertler 1989 and bernanke gertler and gilchrist 1998 therefore the countercyclical nature of price cost margins that we study here provides empirical support to the large body of literature in macroeconomic theory on this financial accelerator with price cost margins in the market for credit being countercyclical credit becomes more expensive in bad times firms may delay investment and production as a result and recessions may be exacerbated

bank funding costs in a rising interest rate environment one key risk to the banking system is how funding costs will change as monetary policy is normalized and interest rates rise after almost a decade of near zero rates our contribution is to develop a model that jointly estimates banks balance sheets and retail interest rates to arrive at a consistent estimate of the change in bank funding costs as market rates change our estimates imply a 100 basis point shock to the federal funds rate would increase overall deposit funding costs by about 40 billion which is roughly equal to 25 of aggregate annual net income for commercial banks and savings institutions we also find that deposit rate responses are largely symmetric in contrast to some previous research showing deposit rates are less responsive to upward movements in reference rates we introduce unique and confidential data on bank deposit betas to anchor our results

on the international harmonization of bank regulation this paper offers a three way typology of bank regulation and examines the question of international harmonization for each category for economic regulation the danger is that harmonization could support and preserve domestic protectionist regulatory regimes but it could instead be a beneficial guise for lowering protectionist barriers the latter efforts should be encouraged for prudential regulation national regulation should be adequate to handle the extra stresses of international banking harmonization efforts e g the basle accord may offer only modest help but the accord may offer indirect help by limiting national governments competitive efforts implicitly to subsidize their banks risk taking activities finally for information regulation national regulation appears to be adequate and international harmonization does not appear to be necessary copyright 1994 by oxford university press

the effect of technological imitation on corporate innovation evidence from us patent data abstract technological imitation may play a crucial role in motivating firms to innovate however theoretical predictions and empirical findings on the role of imitation have not yet reached a consensus one major gap in the previous studies is that the empirical tests are based on samples consisting of only one industry over a short period of time this study uses a novel measure of industry level technological imitation proxied by quick citations by competitors to examine the relationship between imitation and innovation using us patent data for the period 1977 2005 we find that there are inverted u shaped relationships between the degree of industry level technological imitation and industry level innovation activities and between the degree of industry level technological imitation and the value of firm level innovation our results suggest that positive externalities from the interactions among firms during the innovation process outweigh the negative effects of free riding concerns on firms innovation activities and incentives to innovate up to a high degree of technological imitation while free riding concerns outweigh the positive externalities when the level of technological imitation is extremely high the sector by sector analyses show that the relationship between technological imitation and the quantity and market value of innovation are not very different across pavitt sectors a comparative analysis on the role of imitation between agglomerated and non agglomerated industries suggests that the positive effect of a moderate level of imitation and the negative effect of an excessive level of imitation are more pronounced for agglomerated industries the results suggest that creating innovation clusters such as silicon valley in the united states and shenzhen city in china and allowing different innovators to cooperate imitate and compete with each other would be very effective in promoting corporate innovation however an excessively high level of technological imitation is more detrimental for firms in innovation clusters because it lowers those firms incentives to innovate more radically

the structure performance relationship for european banking abstract the relationship between market structure and performance has been studied extensively for american banking in contrast little work has been done to investigate this relationship for european banking two explanations of a positive correlation between profitability and concentration have been advanced the traditional structure performance hypothesis scp and the efficient structure hypothesis previous empirical tests of the alternative hypotheses have yielded mixed results but the tests were not robust because they did not incorporate measures of efficiency directly in the model this study applies a stochastic cost frontier as proposed by aigner et al 1977 to derive measures of x inefficiency and scale inefficiency under the assumption that the errors are distributed half normal we incorporate these measures of inefficiencies directly into the tests as proposed by berger and hannan 1993 we do not find a positive and significant relationship between concentration and profitability for a sample of banks across 11 european countries over a four year period 1988 1991 however we do find evidence to support one of the two versions of the efficient structure hypothesis for banks located in countries with low concentration of banks since little support is found for either of the scp hypotheses a simple policy of strict limitations on cross border acquisitions and growth is not warranted

measuring rents and interest rate risk in imperfect financial markets the case of retail bank deposits traditional measures of interest rate risk assume that prices of financial assets and liabilities are set in perfectly competitive markets however evidence suggests that many retail financial markets do not follow the competitive paradigm in this paper we employ a general contingent claims framework to value rents earned by banks in demandable retail deposit markets our analysis provides a natural and economically meaningful measure of interest rate risk for these imperfectly competitive markets using monthly survey data on now accounts and mmdas we estimate the value of retail deposit rents and deposit durations for more than 200 commercial banks

market concentration and competition in oecd mobile telecommunications markets this study analyses the progress of market concentration in oecd member states mobile telecommunications markets and evaluates the relationship between market concentration and performance using annual panel data from 24 oecd member states for the 1998 2011 period the study estimates regression equations for market concentration mobile prices and profits the empirical results indicate that the more concentrated the mobile market the higher the prices and profits providing support for the market power hypothesis if this hypothesis holds then market concentration can be a useful indicator of market performance on the other hand the applicability of the hypothesis is unclear for the second half of the sample period the results provide evidence that regulatory policies influence the structure and performance of mobile markets

financial nexus efficiency and soundness in banking and capital markets based on a modified version of the model used in corvoisier and gropp 2002 and de guevara et al 2005 we argue that banks soundness the structural characteristics and efficiency of the banking sector along with the development of the capital markets constitute a financial nexus for a data set of 63 developed and developing countries we find evidences that efficiency significantly modulates the linkages between concentration and soundness we also find that capital markets development supports a stable evolution in banking sector for the relationship between capital markets and soundness our findings appear to be robust for various measures of the considered variables as well as for different estimation techniques regarding the impact of the concentration upon soundness the results obtained display a certain sensitivity about the way concentration is measured

bank deposit rate clustering theory and empirical evidence the market prices of stocks and other assets tend to cluster on round fractions a similar clustering is found in the interest rates paid on retail bank deposits however the theoretical rationales given for asset price clustering are incompatible with the clustering of retail deposit rates this paper proposes a theory based on depositors limited recall it shows that when banks exploit this phenomenon deposit rates will tend to be set at round fractions and will be relatively sticky at these levels the implications of this theoretical model are tested using money market deposit account and retail certificate of deposit interest rate data from a sample of more than 500 banks