Competition in the Financial Sector: Overview of Competition Policies

Stijn Claessens ()

No 09/45, IMF Working Papers from International Monetary Fund

Abstract: As in other sectors, competition in finance matters for allocative, productive and dynamic efficiency. Theory suggests, however, that unfettered competition is not first best given the special features of finance. I review these analytics and describe how to assess the degree of competition in markets for financial services. Existing research shows that the degree of competition greatly varies across markets, largely driven by barriers to entry and exit. I argue that changes in financial services industries require updated competition policies and institutional arrangements, but that practices still fall short. Furthermore, I show that developing countries face some specific competition challenges.

Keywords: Financial sector; Emerging markets; Financial institutions; Competition; Capital markets; Securities markets; Securities regulations; Economic models; Cross country analysis (search for similar items in EconPapers)
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Date: Written
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Journal Article: Competition in the Financial Sector: Overview of Competition Policies (2009)
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