Assessing market power in the U.S. commercial banking industry under deregulation

Shun-Chiao Chang, Jui-Chuan Della Chang and Tai-Hsin Huang

Economic Modelling, 2012, vol. 29, issue 5, 1558-1565

Abstract: This study attempts to investigate market power in the U.S. commercial banking industry since the U.S. government began to deregulate the banking sector in the early 1990s using the static Bresnahan–Lau model (SBLM) and dynamic Bresnahan–Lau model with error corrections (DBLEC). In particular, panel unit root and panel cointegration techniques are utilized to examine the dynamic model. The empirical results of the SBLM show that the banking industry is highly competitive. The empirical results of DBLEC also suggest that the commercial banking industry is close to being perfectly competitive in the short run. By contrast, the adjustment speeds of the supply and demand sides towards the long-run equilibrium are quite slow in that market, which implies that the U.S. commercial banks enjoy a certain degree of long-run market power.

Keywords: Market power; Bresnahan–Lau model; DBLEC; Panel cointegration (search for similar items in EconPapers)
JEL-codes: C33 D42 G21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:5:p:1558-1565

DOI: 10.1016/j.econmod.2012.05.007

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