Financial Intermediation Spread and Market Power: the Case of Costa Rica

Allechar Serrano-López () and Alejandro Castro-Arias ()
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Allechar Serrano-López: Department of Economic Research, Central Bank of Costa Rica
Alejandro Castro-Arias: Central Bank of Costa Rica

No 1304, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: This paper examines directly market power as a determinant of nancial intermediation margin for Costa Rican banks for the period 2000-2012. The study is based on a theoretical model of pro t maximization for a representative bank and within the main results is that the market power has been an important factor when banks determining interest rates. However, market power has decreased in time for state banks while it has increased for private banks. Therefore, despite of the nancial reforms carried out decades ago and the increased presence of international banks, the national banking sector has not achieved competitive equilibrium yet. ***Resumen: El presente trabajo examina de forma directa el poder de mercado como determinante del margen de intermediación financiera para el sistema bancario costarricense en el periodo 2000-2012. El estudio parte de un modelo te orico de maximización de beneficios para un banco representativo y dentro de los principales resultados se encuentra que el poder de mercado en el sistema bancario nacional ha sido un factor relevante que las entidades consideran cuando determinan sus tasas de interés. Sin embargo, al estudiar la banca estatal se encuentra que su poder de mercado ha disminuido en el tiempo mientras que el de la banca privada se ha incrementado. Por lo tanto, a pesar de las reformas nancieras llevadas a cabo décadas atrás y a la mayor presencia de la banca internacional, el sector bancario nacional aún no alcanza un equilibrio competitivo.

Keywords: Interest rate; Bank spreads; Market power; Tasas de interés, Margen de intermediación, Poder de mercado (search for similar items in EconPapers)
JEL-codes: E43 E44 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-01
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:1304

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