Do Public Banks have a Competitive Advantage?

Astrid Matthey

No 2007-100, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Private banks often blame state guarantees to distort competition by giving public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic development, private banks may be able to separate ï¬ rms by self selection, enter the market, and obtain proï¬ ts in equilibrium despite their cost disadvantage. The public bank's competitive advantage may be offset, independently of what its true objective function is. Even perfect competition between private banks does not lead to zero proï¬ ts.

Keywords: public banks; state guarantee; self-selection (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2007-12-07
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do public banks have a competitive advantage? (2010)
Working Paper: Do public banks have a competitive advantage? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:jrp:jrpwrp:2007-100

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