The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence

Ahmet Faruk Aysan () and Nusret Ahmet Müslim

MPRA Paper from University Library of Munich, Germany

Abstract: The high credit card interest rates in Turkey attracted considerable attention in recent years to regulate the Turkish credit card industry. Before any regulation decision taken, there needs to be better conceptualization and analysis of the Turkish credit card market. First, we highlight the most striking aspects of the Turkish credit card market. After exposing the problem, we benefit from the existing theoretical and empirical studies on the structure of competition in the credit card industry. Potential reasons for the lack of competitions are denoted. Having the existing studies in mind, we finally, construct an empirical model to estimate the market structure in the Turkish credit card industry. Newly disseminated data on the Turkish credit card industry is first introduced in this paper. Our empirical results are based on the panel data set of 22 banks from the second quarter of 2001 to the third quarter of 2005. In addition to random and fixed effects regressions, instrumental variable fixed effect regressions are run on this sample. Our results robustly conclude that the credit cards interest rates in Turkey are economically insensitive to the changes in the cost of fund. This result shows lack of strong competition Turkish credit card market.

Keywords: Credit Cards; Regulation; Supervision; Financial Markets; Banking; Competition Market Structure. (search for similar items in EconPapers)
JEL-codes: D41 G00 D40 (search for similar items in EconPapers)
Date: 2006
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Related works:
Working Paper: The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence (2006)
Working Paper: The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence (2006)
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