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The impact of regulation on credit card market competition: evidence from Australia

Author

Listed:
  • Ming-Hua Liu

    (University of Macau)

  • Dimitris Margaritis

    (University of Auckland)

  • Yang Zhang

    (University of Macau)

Abstract

Using an error-correction style ARDL model and bounds tests for co-integration, we examine the impact of credit card reform on the relationship between credit card interest rates and funding costs in Australia. Our results show that after a major reform was carried out in the early 2000s, Australian banks reduced the spread between credit card lending rates and deposit rates. In both the long term and the short term, credit card rates were more responsive to changes in the cost of funds. However, after the outbreak of the GFC, the impact of the reform has been more than reversed and there is no evidence further reforms have bucked this trend.

Suggested Citation

  • Ming-Hua Liu & Dimitris Margaritis & Yang Zhang, 2023. "The impact of regulation on credit card market competition: evidence from Australia," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(3), pages 669-689, September.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:3:d:10.1007_s12197-023-09619-w
    DOI: 10.1007/s12197-023-09619-w
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    More about this item

    Keywords

    Credit card reform; ARDL; Bounds Tests; Australian banks; Bank Competition;
    All these keywords.

    JEL classification:

    • 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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