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Market Power Evolution of Financial Intermediation Services in Argentina: Effects of Favorable Macroeconomic Perspectives?

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  • Karina Otero

    (Central Bank of Argentina)

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    Abstract

    The low depth of the argentinian financial system has motivated doubts about its potentials of development, even under relatively favorable macroeconomic expectations. Contributing to the analysis of this key industry, the current paper develops a methodology to measure the evolution of the financial system’s market power. The structural model follows the guidelines of the “New Empirical Industrial Organization” (NEIO) and the “discrete choice” literature. Additionally, several modifications were incorporated to get a more accurate analysis of the local industry. Among the obtained results, some evidence was found supporting the presence of market power in the financial intermediation industry. Nevertheless, some signs of certain increase in the competition level were found. This paper attempts to provide new elements to applied literature on the local financial market. The proposed framework models the industry production, taking into account the duality of the financial intermediation business.

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    File URL: http://www.bcra.gov.ar/pdfs/investigaciones/WP%202008%2031.pdf
    File Function: Spanish version (versión en Español)
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    Bibliographic Info

    Paper provided by Central Bank of Argentina, Economic Research Department in its series BCRA Working Paper Series with number 200831.

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    Length: 32 pages
    Date of creation: Jan 2008
    Date of revision:
    Handle: RePEc:bcr:wpaper:200831

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    Related research

    Keywords: Argentina; bank competition; bank services; demand; financial entities; financial services; market power;

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    12. Robert M. Adams & Lars-Hendrik Röller & Robin C. Sickles, 2002. "Market Power in Outputs and Inputs: An Empirical Application to Banking," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 02-33, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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    14. Timothy H. Hannan, 1991. "The functional relationship between prices and market concentration: the case of the banking industry," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 169, Board of Governors of the Federal Reserve System (U.S.).
    15. Astrid A. Dick, 2002. "Demand estimation and consumer welfare in the banking industry," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2002-58, Board of Governors of the Federal Reserve System (U.S.).
    16. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 891-951, July.
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