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Characterising market power and its determinants in the Zambian banking indudstry

Anthony Simpasa ()

MPRA Paper from University Library of Munich, Germany

Abstract: This article evaluates the intensity of competition by estimate a bank-specific and time varying Lerner Index as a measure of market power by Zambian banks in the post-reform period. Using a model of oligopolistic conduct, we show that Zambian banks exercised market power in setting prices. Furthermore, market concentration, efficiency performance, diversity in revenue sources and regulatory intensity accounted for much of the banks’ exercise of market power. However, the results indicate that credit risk and macroeconomic uncertainty had a weakening effect on the banks’ exercise of market power. The policy lesson from the analysis is that regulatory authorities should continue with the policy of opening up the financial sector to more players in order to foster contestability in the banking industry.

Keywords: Banking; market power; competition (search for similar items in EconPapers)
JEL-codes: C33 D43 G21 (search for similar items in EconPapers)
Date: 2010-12-06
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (2)

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