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Banking competition and economic growth: cross-country evidence

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  • Juan Fernandez de Guevara
  • Joaquin Maudos

Abstract

The aim of this paper is to analyse the effect of banking competition on industry economic growth using both structural measures of competition and measures based on the new empirical industrial organisation perspective. The evidence obtained in the period 1993-2003 for a sample of 53 sectors in 21 countries indicates that financial development promotes economic growth. The results also show that bank monopoly power has an inverted-U-shaped effect on economic growth, suggesting that bank market power has its highest growth effect at intermediate values. The latter result is consistent with the literature on relationship lending, which argues that bank competition can have a negative effect on the availability of finance for companies that are informationally more opaque.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/1351847X.2011.554300
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 17 (2011)
Issue (Month): 8 ()
Pages: 739-764

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Handle: RePEc:taf:eurjfi:v:17:y:2011:i:8:p:739-764

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Related research

Keywords: economic growth; banking competition; financial development;

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Cited by:
  1. Michiel Bijlsma & Andrei Dubovik, 2014. "Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature," CPB Discussion Paper 266, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Lev Ratnovski, 2013. "Competition Policy for Modern Banks," IMF Working Papers 13/126, International Monetary Fund.
  3. Edoardo Gaffeo & Ronny Mazzocchi, 2014. "Competition in the banking sector and economic growth: panel-based international evidence," DEM Discussion Papers 2014/02, Department of Economics and Management.

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