The Role of the Number of Banks on Debt Dynamics: Evidence from Eurozone Countries

Karpetis Christos (), Stephanos Papadamou and Erotokritos Varelas
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Karpetis Christos: Department of Balkan, Slavic & Oriental Studies, University of Macedonia, Thessaloniki, Greece

Review of Economics, 2017, vol. 68, issue 1, 41-62

Abstract: This paper addresses the issue of impacts of the banking market structure on debt dynamics. Using a simple theoretical model, we analytically find a positive link between number of banks and growth rate of debt. By applying panel data analysis on a set of Eurozone countries, sufficient evidence for this positive relationship is provided. In case of Portugal, Italy, Greece, Spain (PIGS countries) the effects are more pronounced. More specifically, the dominant effects on debt were the GDP growth rate, the primary balance over debt ratio and the number of banks. Therefore, bank regulation should pay attention on theses linkages, implying significant benefits for debt stability.

Keywords: bank competition; public debt; panel data; panel VAR (search for similar items in EconPapers)
JEL-codes: G1 G21 H60 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/roe-2017-0001

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