What affects bank market power in the Euro area? A structural model approach

Paolo Coccorese, Claudia Girardone and Sherrill Shaffer

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: In this study we explore market power in 13 EU banking sectors for the years 2007 to 2019 by estimating a structural model 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, and better macroeconomic conditions. 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)
Pages: 37 pages
Date: 2021-01
New Economics Papers: this item is included in nep-ban, nep-com, nep-eec and nep-fdg
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-15

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