A reexamination on the effect of bank competition on bank non-performing loans

Alan T. Wang

Applied Economics, 2018, vol. 50, issue 57, 6165-6173

Abstract: This article examines whether competition in the deposit and loan markets results in a more stable or fragile banking industry. Following the assumption that deposit and loan competitions are not separable, a simple equilibrium model is developed. Then, using the aggregate time-series data of Federal Deposit Insurance Corporation (FDIC)-insured financial institutions, we estimate the generalized VAR model of deposit rate (DR), interest margin between the loan and DRs, and non-performing loan ratio. Our results support the competition–fragility hypothesis.

Date: 2018
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DOI: 10.1080/00036846.2018.1489505

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