A Comment on "The Effects of Banking Competition on Growth and Financial Stability" PDF Download
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Author: Andrea Calef
Publisher:
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Languages : en
Pages : 0
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Book Description
Carlson et al. (2022) examine the causal impact of banking competition by investigating a unique circumstance in the National Banking Era of the nineteenth century in the US, where a discontinuity in bank capital requirements occurred. On the one hand, their findings suggest that banks operating in markets with fewer barriers to entry tend to increase their lending activities, promoting real economic growth. On the other hand, banks in less restricted markets also exhibit a higher propensity for risk-taking, posing risks to financial stability. First, we fully reproduce the paper's outcomes apart from a minor discrepancy in the estimate of Table 9 attributed to issues in the provided codes. Second, we test the robustness of the results by (i) changing the ranges used to select the sample of cities included in the analysis, (ii) adopting different options to address outliers' potential issues and (iii) introducing additional control variables. We observe that the estimation results remain mostly consistent when subjecting them to various robustness checks. However, it is worth highlighting that the results can be partially influenced by the criteria used to select the sample of cities and the inclusion of control variables.
Author: Andrea Calef
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Carlson et al. (2022) examine the causal impact of banking competition by investigating a unique circumstance in the National Banking Era of the nineteenth century in the US, where a discontinuity in bank capital requirements occurred. On the one hand, their findings suggest that banks operating in markets with fewer barriers to entry tend to increase their lending activities, promoting real economic growth. On the other hand, banks in less restricted markets also exhibit a higher propensity for risk-taking, posing risks to financial stability. First, we fully reproduce the paper's outcomes apart from a minor discrepancy in the estimate of Table 9 attributed to issues in the provided codes. Second, we test the robustness of the results by (i) changing the ranges used to select the sample of cities included in the analysis, (ii) adopting different options to address outliers' potential issues and (iii) introducing additional control variables. We observe that the estimation results remain mostly consistent when subjecting them to various robustness checks. However, it is worth highlighting that the results can be partially influenced by the criteria used to select the sample of cities and the inclusion of control variables.
Author: Mr.Lev Ratnovski
Publisher: International Monetary Fund
ISBN: 1484366174
Category : Business & Economics
Languages : en
Pages : 20
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Book Description
Traditional bank competition policy seeks to balance efficiency with incentives to take risk. The main tools are rules guiding entry/exit and consolidation of banks. This paper seeks to refine this view in light of recent changes to financial services provision. Modern banking is largely market-based and contestable. Consequently, banks in advanced economies today have structurally low charter values and high incentives to take risk. In such an environment, traditional policies that seek to affect the degree of competition by focusing on market structure (i.e. concentration) may have limited effect. We argue that bank competition policy should be reoriented to deal with the too-big-to-fail (TBTF) problem. It should also focus on the permissible scope of activities rather than on market structure of banks. And following a crisis, competition policy should facilitate resolution by temporarily allowing higher concentration and government control of banks.
Author: Xavier Vives
Publisher: Princeton University Press
ISBN: 0691210039
Category : Business & Economics
Languages : en
Pages : 344
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Book Description
A distinguished economist examines competition, regulation, and stability in today's global banks Does too much competition in banking hurt society? What policies can best protect and stabilize banking without stifling it? Institutional responses to such questions have evolved over time, from interventionist regulatory control after the Great Depression to the liberalization policies that started in the United States in the 1970s. The global financial crisis of 2007–2009, which originated from an oversupply of credit, once again raised questions about excessive banking competition and what should be done about it. Competition and Stability in Banking addresses the critical relationships between competition, regulation, and stability, and the implications of coordinating banking regulations with competition policies. Xavier Vives argues that while competition is not responsible for fragility in banking, there are trade-offs between competition and stability. Well-designed regulations would alleviate these trade-offs but not eliminate them, and the specificity of competition in banking should be accounted for. Vives argues that regulation and competition policy should be coordinated, with tighter prudential requirements in more competitive situations, but he also shows that supervisory and competition authorities should stand separate from each other, each pursuing its own objective. Vives reviews the theory and empirics of banking competition, drawing on up-to-date analysis that incorporates the characteristics of modern market-based banking, and he looks at regulation, competition policies, and crisis interventions in Europe and the United States, as well as in emerging economies. Focusing on why banking competition policies are necessary, Competition and Stability in Banking examines regulation's impact on the industry's efficiency and effectiveness.
Author: Christopher Gan
Publisher: MDPI
ISBN: 3036509402
Category : Technology & Engineering
Languages : en
Pages : 142
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Book Description
The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, the bank is able to provide unique services in the production and exchange of information. Therefore, banks have comparative advantages in information production, transmission, and utilisation. This book provides an overview of commercial banking and includes empirical methods in banking such risk and bank performance, capital regulation, bank competition and foreign bank entry, bank regulation on bank performance, and capital adequacy and deposit insurance.
Author: Mr.Gianni De Nicolo
Publisher: International Monetary Fund
ISBN: 1463927290
Category : Business & Economics
Languages : en
Pages : 39
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Book Description
We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy.
Author: Samangi Bandaranayake
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
"This study replicates Zigraiova and Havranek's (2016) meta-analysis of banking competition and financial stability. It performs three types of replications: a "Reproduction" replication where Z&H's data and code are verified to reproduce the results of their study; a "Repetition" replication where the studies used by Z&H are independently recoded and then re-analyzed; and an "Extension" replication, where 35 additional studies on banking competition and stability are examined to see if they confirm Z&H's findings. Our replication analyses confirm Z&H's main finding that competition in the banking sector is unrelated to financial stability. However, we do not confirm their finding of publication selection in the "Extension" replication, and both "Repetition" and "Extension" replications fail to confirm most of Z&H's findings about the effects of data, estimation, and study characteristics on estimated competition effects. While our "Repetition" replication produced a high match rate with Z&H's data, we found that the meta-regression analysis was substantively impacted by discrepancies between the original and recoded data. We conclude that meta-regression analyses should be viewed with caution. We also demonstrate that "best practice" estimates can be precarious and highly dependent on variable specification and how "best practice" is defined. They like wise should be viewed with caution. Our study highlights the value-added that replication brings to meta-analyses. While some of Z&H's results were found to not be robust, the fact that all three types of replications confirmed Z&H's main finding about competition and stability provides strong evidence that this finding can be regarded with confidence. Keywords: Bank competition, financial stability, Bayesian model averaging, meta-analysis, publication selection, replication."--Page [ii].
Author: OECD
Publisher: OECD Publishing
ISBN: 9264120564
Category :
Languages : en
Pages : 87
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Book Description
This report examines the interplay between banking competition and financial stability, taking into account the experiences in the recent global crisis and the policy response to it. The report has been prepared by members of the Directorate of ...
Author:
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Languages : en
Pages :
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Author: Ronald D. Fischer
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We consider a two-period model of a banking system to explore the effects of competition on the stability and efficiency of economic activity. In the model, competing banks lend to entrepreneurs. After entrepreneurs receive the loans for their projects, there is a probability of a shock. The shock implies that a fraction of firms will default and be unable to pay back their loans. This will require banks to use their capital and reserves to pay back depositors, restricting second period lending, thus amplifying the economic effect of the initial shock. There are two possible types of equilibria: a prudent equilibrium in which banks do not collapse after the shock, and an imprudent equilibrium where banks collapse. We examine the effects of increased competition in this setting.First, we find existence conditions for a prudent equilibrium. Second, we show that the effect of increased banking competition is to increase the efficiency of the economy at the expense of increased variance in second period economic results. In particular, if the probability of a shock is small, increased competition raises both expected GDP over the two periods and expected activity in the second period, after the shock. Increased competition also increases the attractiveness of imprudent equilibria.Unpredicted regulatory forbearance in the aftermath of a shock can be used to reduce or eliminate the variance in economic activity. However, if regulatory forbearance is expected in response to a shock, the effect on the variance of economic activity after the shock is ambiguous and can even lead to increased variance after a shock. Finally we show that independently of the type of equilibria or the possibility of a switch among types of equilibria, Increased banking competition increases the amplification effect after a shock.
Author: Samangi Bandaranayake
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
"This study replicates Zigraiova and Havranek's (2016) meta-analysis of banking competition and financial stability. It performs multiple types of replications: a "Reproduction"replication where Z&H's data and code are verified to reproduce the results of their study; a "Repetition" replication where the studies used by Z&H are independently recoded and then re-analyzed; an "Extension" replication where additional studies on banking competition and stability are analyzed; and a "Robustness Analysis" where we check Z&H's results using an alternative empirical procedure. Our analysis strongly confirms Z&H's main finding that competition in the banking sector has an economically negligible effect on financial stability.This result is consistently confirmed across a variety of replication analyses. Most impressively, we confirm their finding even when we analyze a completely independent set of 35 studies not included in Z&H's meta-analysis. Our results for Z&H's other findings are less supportive. As the first comprehensive replication of a meta-analysis, this study also provides insights into the robustness of meta-analysis. We find that meta-regression analysis, where estimated effects are related to data, estimation, and study characteristics, is sensitive to how data are coded and to the choice of estimation procedure; and that this sensitivity extends to "best practice" estimates. Keywords: Bank competition, financial stability, Bayesian model averaging, meta-analysis,publication selection, replication"--Page [ii].
