What affects bank market power in the euro area? A country-level structural model approach

Paolo Coccorese, Claudia Girardone and Sherrill Shaffer

Journal of International Money and Finance, 2021, vol. 117, issue C

Abstract: In this study we explore market power in 13 euro area banking sectors for the years 2007 to 2019 by means of a structural model framework with demand and supply equations, where the mark-up of price over marginal cost is parameterized as a measure of banks’ conduct that depends on selected factors. Our evidence indicates that EU banks enjoy a significant degree of market power, which shows a decreasing trend over time and some difference across countries. More competition is associated with higher bank density, lower bank capitalization, more efficient and stable banking systems, better macroeconomic conditions, and the establishment of the SSM. Finally, a clear convergence pattern emerges in the behaviour of EU banks.

Keywords: Banking; Market power; European integration (search for similar items in EconPapers)
JEL-codes: C36 F36 G21 L10 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:117:y:2021:i:c:s0261560621000942

DOI: 10.1016/j.jimonfin.2021.102443

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