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Evolutionary model of the bank size distribution

Joachim Kaldasch

No 2013-55, Economics Discussion Papers from Kiel Institute for the World Economy (IfW)

Abstract: An evolutionary model of the bank size distribution is presented based on the exchange and expansion of deposit money. In agreement with empirical results the derived size distribution is lognormal with a power law tail. The key idea of the theory is to regard the creation of money as a slow process compared to exchange processes of deposit money. The exchange of deposits causes a preferential growth of banks with a fitness determined by the competitive advantage to attract permanent deposits. They generate the lognormal part of the size distribution. Sufficiently large banks, however, benefit from economies of scale leading to a Pareto tail. The model suggests that the liberalization of the banking system in the last decades is the origin of an increasing skewness of the bank size distribution.

Keywords: evolutionary economics; bank size; money; competition; Gibrat's law (search for similar items in EconPapers)
JEL-codes: G21 L11 E11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-evo, nep-hme and nep-ind
Date: 2013
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https://www.econstor.eu/bitstream/10419/85244/1/770494021.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201355

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