The Evolution of Banking Competition in Italian Credit Markets Using a Profit Elasticity Approach

Michele Benvenuti () and Silvia Del Prete ()
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Michele Benvenuti: Banca d’Italia, Head of the Bolzano Branch
Silvia Del Prete: Banca d’Italia, Firenze Branch, Regional Economic Research Division

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2025, vol. 11, issue 1, No 13, 402 pages

Abstract: Abstract As in other industries, competition in credit markets is potentially beneficial to efficiency and social welfare. Unfortunately, measuring such competition is a complex task, affected by entry barriers, product substitutability, and concentration effects. We adopt a recent approach, the Profit Elasticity Index, in order to assess the significant changes in the Italian loan market over the period 1994–2013. Our main findings suggest that, in that period, deregulation and M &A activity were associated with an increase in the extent of competition, while, during the financial crisis, banking competition declined. Moreover, mutual banks faced relatively less competitive local markets, and banking competition was heterogeneous across Italian macro-regions.

Keywords: Banking competition; Financial crisis; Local credit markets; Profit elasticity (search for similar items in EconPapers)
JEL-codes: G21 L16 R11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40797-023-00233-7

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