Simpasa, Anthony (2010): Characterising market power and its determinants in the Zambian banking indudstry.
Download (536Kb) | Preview
This article evaluates the intensity of competition by estimate a bank-specific and time varying Lerner Index as a measure of market power by Zambian banks in the post-reform period. Using a model of oligopolistic conduct, we show that Zambian banks exercised market power in setting prices. Furthermore, market concentration, efficiency performance, diversity in revenue sources and regulatory intensity accounted for much of the banks’ exercise of market power. However, the results indicate that credit risk and macroeconomic uncertainty had a weakening effect on the banks’ exercise of market power. The policy lesson from the analysis is that regulatory authorities should continue with the policy of opening up the financial sector to more players in order to foster contestability in the banking industry.
|Item Type:||MPRA Paper|
|Original Title:||Characterising market power and its determinants in the Zambian banking indudstry|
|Keywords:||Banking, market power, competition|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Anthony Musonda Simpasa|
|Date Deposited:||07. Dec 2010 08:32|
|Last Modified:||11. Feb 2013 21:10|
Aboagye, A. Q., Akoena, S., Antwi-Asare, T., & Gockel, A. (2008). 'Explaining the market power of Ghanaian banks'. South African Journal of Economics , 76, 569-585.
Angelini, P., & Cetorelli, N. (2003). 'The effects of regulatory reform on competition in the banking industry'. Journal of Money, Credit and Banking , 35, 663-684.
Appelbaum, E. (1982). 'The estimation of the degree of oligopoly power'. Journal of Econometrics , 19, 287-299.
Ausunbel, L. (1991). 'The failure of competition in the credit card market'. American Economic Review , 81, 50-81.
Beighley, P. H., & McCall, A. (1975). 'Market power and structure and bank installment lending'. Journal of Money,Credit and Banking , 7, 449-467.
Berg, A. S., & Kim, M. (1998). 'Banks as multioutput oligopolies: an empirical evaluation of the retail and corporate banking markets'. Journal of Money,Credit and Banking , 30, 135-153.
Bresnahan, T. F. (1989). 'Empirical studies of industries with market power'. In R. Schmalensee, & R. Willig (Eds.), Handbook of Industrial Organization (Vol. 2, pp. 1011-1057). Amsterdam: North-Holland.
Bresnahan, T. F. (1982). 'The oligopoly solution concept is identified'. Economic Letters , 10, 87-92.
Carbó Valverde, S., Humphrey, D., & Rodriguez, F. (2003). 'Deregulation, bank competition and regional growth'. Regional Studies , 37, 227-237.
Chirwa, E. W., & Mlachila, M. (2004). 'Financial reforms and interest rate spreads in the commercial banking system in Malawi'. IMF Staff Papers , 51, 96-122.
Coccorese, P. (2009). 'Market power in local banking monopolies'. Journal of Banking & Finance , 33, 1196-1210.
Corviosier, S., & Gropp, R. (2002). 'Bank concentration and retail interest rates'. Journal of Banking and Finance , 26, 2155-2189.
Cowling, K., & Waterson, M. (1976). 'Price-cost margins and market structure'. Economica , 43, 267-274.
Delis, D. M., Staikouras, K. C., & Varlagas, T. (2008). 'On the measurement of market power in the banking industry'. Journal of Business Finance and Accounting , 35, 1-25.
Dvořák, P. (2005). 'Rethinking the Monti-Klein model of banking industry: new insights about the separability of loans and deposits decisions'. Discussion Paper No. 2005-138 . Centre for Economic Research and Graduate Education, CERGE-EI.
Fahrer, J., & Rohling, T. (1981). 'Some tests of competition in the Australian housing loan market'. Australian Economic Papers , 33, 107-119.
Fernandez de Guevara, J., & Maudos, J. (2007). 'Explanatory factors of market power in the banking system'. The Manchester School , 75, 275-296.
Fernandez de Guevara, J., Maudos, J., & Perez, F. (2005). 'Market power in European banking sectors'. Journal of Financial Services Research , 27, 109-137.
Fischer, K.-H., & Hempell, H. S. (2006). 'Regional markets, oligopoly and market power in banking'. Retrieved August 2008, from teaching.coll.mpg.de/econwork/FischerHempell.pdf
Freixas, X., & Rochet, J. (1997). 'Microeconomics of banking'. Cambridge: Massachusettes Institute of Technology (MIT) Press.
Green, W. H. (2003). 'Econometric Analysis'. New Jersey: Prentice Hall.
Gropp, R., Sørensen, C. K., & Lichtenberger, J.-D. (2007). 'The dynamics of bank spreads and financial structure'. Working Paper Series, No.714 . European Central Bank.
Hanan, T., & Liang, N. (1993). 'Inferring market power from times series data: the case of of the banking firm'. International Journal of Industrial Organisation , 11, 205-218.
Hoechle, D. (2007). 'Robust standard errors for panel regressions with cross-sectional dependence'. Stata Journal , 7, 281-312.
IMF and World Bank. (2002). 'Financial Sector Assessment Programme: Selected Financial Sector Issues'. Washington D.C: International Monetary Fund/World Bank.
Jagtiani, J., & Khanthavit, A. (1996). 'Scale and scope economies at large banks: including off-balance sheet products and regulatory effects 1984-1991'. Journal of Banking and Finance , 20, 1271-1287.
Klein, M. (1971). 'A theory of the banking firm'. Journal of Money,Credit and Banking , 7, 205-218.
Kubo, K. (2006). 'The degree of competition in the Thai banking industry before and after the East Asian crisis'. ASEAN Economic Bulletin , 23, 325-340.
Lau, L. (1982). 'On identifying the degree of competitiveness from industry price and output data'. Economics Letters , 10, 93-99.
Lerner, A. (1934). 'The concept of monopoly and the measurement of monopoly power'. Review of Economic Studies , 1, 157-175.
Monti, M. (1972). 'Deposit, credit and interest rate determination under alternative bank objective functions'. In K. Shell, & P. G. Szego (Eds.), Mathematical Methods in Invesment and Finance (pp. 431-454). Amsterdam: North Holland.
Moore, W., & Craigwell, R. (2002). 'Market power and interest rate spreads in the Caribbean'. International Review of Applied Economics , 16, 391-405.
Mutoti, N. (2006). 'Monetary Policy Transmission in Zambia'. Bank of Zambia Working Paper, No. WP/06/2006 . Bank of Zambia.
Okealaham, C. (2007). 'Estimating market power in the South African banking sector'. International Review of Applied Economics , 21, 665-689.
Oxford Policy Management. (2007). 'FinMark Trust: Supply side study of the inclusiveness of Zambia's Financial System'. Lusaka: Government of Zambia (GRZ).
Rochet, J. (1992). 'Capital requirements and the behaviour of commercial banks'. European Economic Review , 36 (5), 1137-1178.
Shaffer, S. (1993). 'A test of competition in Canadian banking'. Journal of Money, Credit and Banking , 25, 49-61.
Shaffer, S. (2001). 'Banking conduct before the European single banking licence: a cross country comparison'. North American Journal of Economics and Finance , 12, 79-104.
Sjöberg, P. (2006). 'Two essays on performance and growth in Swedish banking'. Unpublished PhD Dissertation . Department of Economics,Göteborg University.
Small, I. (1998). 'The cyclicality of mark-ups and profit margins: some evidence for manufacturing and services'. Quarterly Bulletin (August).
Solis, L., & Maudos, J. (2008). 'The social costs of bank marker power: evidence from Mexico'. Journal of Comparative Economics , 36, 467-488.
Stiglitz, J., & Weiss, A. (1981). 'Credit rationing in markets with imperfect information'. American Economic Review , 71, 393-410.
Toolsema, L. (2004). 'Monetary policy and market power in banking'. Journal of Economics , 83, 71-83.
Tovar, J. A., Jaramillo, C. R., & Hernandez, C. E. (2007). 'Risk, concentration and market power in the banking industry: evidence from the Colombian System (1997-2006)'. Serie Documentos Cede, 2007-27 . Centro de Estudios sobre Desarrollo Económico.
Vera, L., Zambrano-Sequin, L., & Faust, A. (2007). 'The efficiency-stability trade-off:the case of high interest rate spreads in Venezuela'. The Developing Economies , XLV, 1-26.
World Bank. (2004). 'Zambia-Country Economic Memorandum: Policies for Growth and Diversification'. Washington DC: World Bank.
Zellner, A. (1962). 'An efficient method of estimating seemingly unrelated regressions and tests of aggregation bias'. Journal of the American Statistical Association , 57, 348-368.