Abstract:Banking competition is expected to provide welfare gains by reducing monopoly rents and cost inefficiencies, favoring the reduction of loan rates and then investment. These expected gains are a major issue for transition countries in which bank credit represents the largest source of external finance for companies. With the use of exhaustive quarterly data for Czech banks, this paper aims at providing evidence on the effects of banking competition in the Czech Republic. First, we measure the level and the evolution of banking competition between 1994 and 2005.Competition is measured by the Lerner index on the loan market, by using data on loan prices. We find no improvement in banking competition during the transition period. Second, we investigate the relationship and the causality between competition and efficiency. We perform a Granger-causality-type analysis which supports a negative causality only running from competition to efficiency. Therefore, our results reject the intuitive 'quiet life' hypothesis and indicate a negative relationship between competition and efficiency in banking.

Banking competition is expected to provide welfare gains by reducing monopoly rents and cost inefficiencies, favoring the reduction of loan rates and then investment. These expected gains are a major issue for transition countries in which bank credit represents the largest source of external finance for companies. With the use of exhaustive quarterly data for Czech banks, this paper aims at providing evidence on the effects of banking competition in the Czech Republic. First, we measure the level and the evolution of banking competition between 1994 and 2005. Competition is measured by the Lerner index on the loan market, by using data on loan prices. We find no improvement in banking competition during the transition period. Second, we investigate the relationship and the causality between competition and efficiency. We perform a Granger-causality-type analysis which supports a negative causality only running from competition to efficiency. Therefore, our results reject the intuitive 'quiet life' hypothesis and indicate a negative relationship between competition and efficiency in banking.

Abstract:We estimate monetary policy rules for six central and eastern European countries (CEEC) during the period when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by splitting up the exchange rate impact into two different components we significantly improve estimation results for monetary policy rules in CEEC. We uncover that the focus of the interest rate setting behaviour in the Czech Republic, Hungary and Poland explicitly switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. Finally, Slovenia and, after a policy switch, Romania exhibit a solid relation with inflation as well.

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We analyse the monetary policy operations of central banks in the Middle East and North Africa. We distinguish liquidity-providing central banks of large industrialized countries (creditor central banks) and liquidity-absorbing central banks of emerging market economies (debtor central banks). Many debtor central banks provide liquidity through foreign exchange intervention as well as by fiscal financing and financial restructuring. If the resulting liquidity creation is regarded as excessive, liquidity is absorbed through sterilization operations such as reserve requirements and (to a limited extent) open market operations. Some central banks coordinate their liquidity management with the fiscal authorities. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.