These are the good old days
Subtitle: foreign entry and the Mexican banking system
By: Stephen Haber, Aldo Musacchio
Contributors: Musacchio, Aldo; Harvard Business School
Series: Working paper / Harvard Business School -- 13-062; Working paper (Harvard Business School) -- 13-062
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston ]
Language: eng
Number of pages: 100
Description: In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico's largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks. The result has been a dramatic shift in the ownership structure of Mexico's banks. For instance, while in 1991 only 1% of bank assets in Mexico were foreign owned, today they control 74% of assets. In no other country in the world has the penetration of foreign banks been as rapid or as far-reaching as in Mexico. In this work we examine some of the important implications of foreign bank entry for social welfare in Mexico. Did liberalization lead to an increase (or decrease) in the supply of credit? Did liberalization lead to an increase (or decrease) in the cost of credit? Did liberalization lead to an increase (or decrease) in the stability of the banking system? In order to answer these questions, we must first ask, "increase (or decrease), measured on what basis?" There are, in fact, two distinct conceptual frameworks through which one can assess the impact of foreign bank entry. One is concerned with measuring the short-run impacts of foreign entry on credit abundance, pricing, and observable stability using reduced form regressions. The other is an institutional economics conception of how to measure performance. It is focused on understanding whether foreign entry gave rise to difficult-to-reverse changes in the political economy of bank regulation, which will affect competition and stability in the long-term, outside the period that may be observed empirically. We employ both conceptions in this paper.
Notes: "January 2013" -- Publisher's website.

Includes bibliographical references (pages 79-85).