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On the income diversification and bank market power nexus in the MENA countries: Evidence from a GMM panel-VAR approach

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  • Zouaoui, Haykel
  • Zoghlami, Feten

Abstract

This paper investigates the dynamic causal relationship between revenue diversification and bank market power using a broad sample of commercial banks from 17 Middle Eastern and North African (MENA) countries over the period 1993–2014. To do so, we employ the panel vector autoregression (PVAR) approach in a generalized method of moments (GMM) framework. Moreover, we use the impulse response functions (IRFs) tool to better understand the reaction of bank market power aftershocks on revenue diversification and vice-versa. Finally, we supplement our analysis by the forecast error variance decompositions (FEVds) of our variables. Overall, the results show that the level of bank market power declines in response to positive revenue diversification shocks. Conversely, banks with a higher level of market power get more involved in non-traditional activities.

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  • Zouaoui, Haykel & Zoghlami, Feten, 2020. "On the income diversification and bank market power nexus in the MENA countries: Evidence from a GMM panel-VAR approach," Research in International Business and Finance, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:riibaf:v:52:y:2020:i:c:s0275531918310663
    DOI: 10.1016/j.ribaf.2020.101186
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    Keywords

    Revenue diversification; Bank market power; Panel vector auto-regression (PVAR); Impulse-response function (IRF); MENA countries;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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    Corrections

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