Oligopolistic competition in the banking market and economic growth

Hamada, Kojun; Kaneko, Akihiko; Yanagihara, Mitsuyoshi

doi:10.1016/j.econmod.2017.07.017

Cited by 13 publications

(6 citation statements)

References 17 publications

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“…In comparison, the results for the average fund rate matches those produced by Hamada et al (2018). They found a positive relationship between an increase in the deposit interest rate and the economic growth rate.…”

Section: This Section Discusses Two Non-structural Approaches (A and ...supporting

confidence: 58%

The Cost Efficiency and Competition Relationship: Evidence from Saudi Arabian Banks and Non-Structural Approaches to Analysis

Alnafisah,

Alwohaibi

2024

Economies

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Over the last two decades, the regulators of the financial services sector in Saudi Arabia have aimed to develop a level of fair competition in the provision of banking services across the country. This paper utilizes non-structural approaches, the H-statistic developed by, and the Granger causality test. The second approach involves determining the Granger-based causal relationship between banks’ cost efficiency and competition via data envelope analysis (DEA) using the generalized method of moments (GMM) panel. The study’s data were drawn from 11 traditional banks in Saudi Arabia, covering the period from 2015 to 2021 (yearly data). The results of the non-structural approach, i.e., the H-statistic, demonstrate that the average fund rate had a positive effect on competition; however, the physical capital price index, the index of leverage, and the credit risk negatively affect the total revenue. Furthermore, a positive H-statistic value reflects the positive causality between competition and cost efficiency (higher efficiency results in a higher level of competition). The DEA results indicate that competition in the year 2021 was influenced by the competition level of the previous year (2020); moreover, the relationship between the previous year’s cost efficiency Granger value, the greater availability, and the lower prices of banking products had a significant influence on the competition in the years under consideration (since a positive significant result from the test is available), which reflects the higher level of market structure and the greater availability and lower prices of banking products. Cost efficiency in the year 2021 was also positively influenced by the cost efficiency level of the previous year (2020), with competition forcing efficiency via the cutting of costs.

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Section: This Section Discusses Two Non-structural Approaches (A and ...supporting

confidence: 58%

The Cost Efficiency and Competition Relationship: Evidence from Saudi Arabian Banks and Non-Structural Approaches to Analysis

Alnafisah,

Alwohaibi

2024

Economies

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“…We find that the interest rate spread due to financial intermediation substantially affects the real economy, and we identify eight channels through which capital market frictions affect the economy and carbon emissions. For all channels, savings and investment are reduced in response to a raised interest rate spread, much in accordance with the literature on growth and financial intermediation (recently in Hamada et al, 2018) or the literature on financial development (Fernández and Tamayo, 2017). For the effect on emissions, we identify emission abating as well as emission increasing channels.…”

Section: Introductionsupporting

confidence: 60%

“…In this approach, intermediation costs represent the costs of providing financial services including underlying agency costs or inefficiency costs of imperfect competition. Recent studies using industrial organizations approaches integrate financial intermediation by banking sectors into models of overlapping generations (Hamada et al, 2018) and endogenous growth (Diallo and Koch, 2018). They find higher growth (Hamada et al, 2018) and a higher probability of innovation (Diallo and Koch, 2018) when interest spreads shrink due to a higher degree of competition.…”

Section: Literaturementioning

confidence: 99%

Climate Finance Intermediation: Interest Spread Effects in a Climate Policy Model

Lessmann¹,

Kalkuhl²

2024

Journal of the Association of Environmental and Resource Econom

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Interest rates are central determinants of saving and investment decisions. Costly financial intermediation distort these price signals by creating a spread between the interest rates on deposits and loans with substantial effects on the supply of funds and the demand for credit. This study investigates how interest rate spreads affect climate policy in its ambition to shift capital from polluting to low-carbon sectors of the economy. To this end, we introduce financial intermediation costs in a dynamic general equilibrium climate policy model. We find that costly financial intermediation affects carbon emissions in various ways through a number of different channels. For low to moderate interest rate spreads, carbon emissions increase by up to 7 percent, in particular, because of lower investments into the capital intensive clean energy sector. For very high interest rate spreads, emissions fall because lower economic growth reduces carbon emissions. If a certain temperature target should be met, carbon prices have to be adjusted upwards by up to one third under the presence of capital market frictions.

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“…According to Caggiano and Calice (2016), competition among banks affects economic growth in two ways: First, banking competition facilitates access to credit for small and new firms, which is important for economic growth. Second, companies dependent on external financing to run their operations are associated with slow patterns of economic growth; an increase in market power may hasten that economic growth (Hamada et al, 2018;Diallo & Koch, 2018;Mitchener & Wheelock, 2013). Claessens (2009) states that banking competi-tion increases the quality of financial services and market innovation.…”

Section: Related Literature and Research Focusmentioning

confidence: 99%

Linking Bank Competition, Financial Stability, and Economic Growth

Ijaz

Hassan

Tarazi

et al. 2020

Journal of Business Economics and Management

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This paper investigates the effect of bank competition and financial stability on economic growth by examining panel-data from 38 European countries over 2001 to 2017. Bank competition is measured with the Boone indicator, and bank stability with Z-scores and non-performing loan ratios, all at the country level. This study employs a fixed-effect estimator, as well as a system generalized method of moment (GMM) estimator to control unobserved heterogeneity, endogeneity, the dynamic effect of economic growth, and reverse causality in its estimation. Results show that bank stability significantly contributes to economic growth in Europe. Economic growth falls during crisis periods (both the global financial crisis and the local banking crisis), highlighting the importance of a resilient banking system during crisis periods. Moreover, empirical outcomes show that lower banking competition supports economic growth and increases financial stability. This study provides a framework for banks and regulators to boost economic growth through the channel of banking stability.

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Oligopolistic competition in the banking market and economic growth

Cited by 13 publications

References 17 publications

The Cost Efficiency and Competition Relationship: Evidence from Saudi Arabian Banks and Non-Structural Approaches to Analysis

The Cost Efficiency and Competition Relationship: Evidence from Saudi Arabian Banks and Non-Structural Approaches to Analysis

Climate Finance Intermediation: Interest Spread Effects in a Climate Policy Model

Linking Bank Competition, Financial Stability, and Economic Growth

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