A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary

Jozsef Molnar, Márton Nagy () and Csilla Horváth ()
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Márton Nagy: Magyar Nemzeti Bank
Csilla Horváth: Radboud University Nijmegen, The Netherlands

No 2007/1, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: In this paper we analyze the degree of competition in the Hungarian household credit and deposit markets. We estimate discrete-choice, multinomial logit deposit service and loan demand functions for each bank and calculate the corresponding price elasticities. Two models of the banking industry are considered: a static, differentiated product Nash-Bertrand oligopoly (as non-collusive benchmark) and a cartel. With estimated marginal costs and observed interest rates we calculate the price-cost margins and compare these to the theoretically implied ones. We find that in our sample period the competition in the Hungarian banking sector is low, i.e. price-cost margins are high.

Keywords: Demand; discrete choice; product differentiation; banking; market power. (search for similar items in EconPapers)
JEL-codes: G21 L11 L13 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2007
New Economics Papers: this item is included in nep-ban, nep-com, nep-dcm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2007/1

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