A Formal Test of Competition in the Banking Sector of Pakistan: An Application of PR-H Statistic

Mahmood ul Hasan Khan (mhkhan45@hotmail.com) and Muhammad Hanif

No 91, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This study explores competition in the banking sector of Pakistan in the context of transformation in its structure and business environment since the implementation of financial sector reforms in the country. Instead of relying on the changes in the market structure indicators (like concentration ratio), we employ widely used Panzar and Rosse H statistic as a formal test of competition. PR-H statistic is estimated by using a balanced panel data comprising 24 commercial banks operating in Pakistan from the year 1996 to 2015. The results suggest that the banking sector of Pakistan exhibits the characteristics of monopolistic and perfectly competitive market structures.

Keywords: Competition; Banking Market Structure; Panzar and Rosse H statistic (search for similar items in EconPapers)
JEL-codes: C12 D40 E50 G20 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2017-07
New Economics Papers: this item is included in nep-ban, nep-com and nep-mac
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