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The Role of the Number of Banks on Debt Dynamics: Evidence from Eurozone Countries

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  • Karpetis Christos

    (Department of Balkan, Slavic & Oriental Studies, University of Macedonia, Thessaloniki, Greece)

  • Papadamou Stefanos

    (Department of Economics, University of Thessaly, 28 Octovriou, Volos38333, Greece)

  • Varelas Erotokritos

    (Department of Economics, University of Macedonia, Thessaloniki, Greece)

Abstract

This paper addresses the issue of impacts of the banking market structure on debt dynamics. Using a simple theoretical model, we analytically find a positive link between number of banks and growth rate of debt. By applying panel data analysis on a set of Eurozone countries, sufficient evidence for this positive relationship is provided. In case of Portugal, Italy, Greece, Spain (PIGS countries) the effects are more pronounced. More specifically, the dominant effects on debt were the GDP growth rate, the primary balance over debt ratio and the number of banks. Therefore, bank regulation should pay attention on theses linkages, implying significant benefits for debt stability.

Suggested Citation

  • Karpetis Christos & Papadamou Stefanos & Varelas Erotokritos, 2017. "The Role of the Number of Banks on Debt Dynamics: Evidence from Eurozone Countries," Review of Economics, De Gruyter, vol. 68(1), pages 41-62, April.
  • Handle: RePEc:lus:reveco:v:68:y:2017:i:1:p:41-62:n:2
    DOI: 10.1515/roe-2017-0001
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    More about this item

    Keywords

    bank competition; public debt; panel data; panel VAR;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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