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What affects bank market power in the euro area? A country-level structural model approach

Coccorese, Paolo and Girardone, Claudia and Shaffer, Sherrill (2021) 'What affects bank market power in the euro area? A country-level structural model approach.' Journal of International Money and Finance, 117. ISSN 0261-5606

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Abstract

In this study we explore market power in 13 euro area banking sectors for the years 2007 to 2019 by means of a structural model framework with demand and supply equations, where the mark-up of price over marginal cost is parameterized as a measure of banks’ conduct that depends on selected factors. Our evidence indicates that EU banks enjoy a significant degree of market power, which shows a decreasing trend over time and some difference across countries. More competition is associated with higher bank density, lower bank capitalization, more efficient and stable banking systems, better macroeconomic conditions, and the establishment of the SSM. Finally, a clear convergence pattern emerges in the behaviour of EU banks.

Item Type: Article
Uncontrolled Keywords: Banking; Market power; European integration
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 08 Jun 2021 15:11
Last Modified: 02 Jul 2021 17:15
URI: http://repository.essex.ac.uk/id/eprint/30553

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