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Out of many, dominance by a few? Market power in the Jamaican banking sector

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  • Daley, Jenifer
  • Matthews, Kent

    ()
    (Cardiff Business School)

Abstract

This paper presents an empirical assessment of the degree of competition within the Jamaican banking sector during the period 1998 to 2007. The popular H-statistic by Panzar and Rosse is utilised to estimate market power among the sample of banks. Using usual statistical tests, we are unable to reject monopoly/perfect collusion for the banking market in Jamaica. This contrasts with earlier findings using alternative estimators. Therefore, the use of a dynamic reformulation of the model with a dynamic estimator highlights some collusive behaviour among banks.

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Bibliographic Info

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2009/28.

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Length: 23 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:cdf:wpaper:2009/28

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Keywords: Competition; banking; Rosse-Panzar H -statistic; Dynamic panel estimation; Jamaica;

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  1. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(3), pages 563-83, June.
  2. Berger, Allen N. & Leusner, John H. & Mingo, John J., 1997. "The efficiency of bank branches," Journal of Monetary Economics, Elsevier, Elsevier, vol. 40(1), pages 141-162, September.
  3. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(4), pages 443-56, June.
  4. Carol Ann Northcott, 2004. "Competition in Banking: A Review of the Literature," Working Papers, Bank of Canada 04-24, Bank of Canada.
  5. J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued), Netherlands Central Bank 68, Netherlands Central Bank.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Al-Muharrami, Saeed & Matthews, Kent & Khabari, Yusuf, 2006. "Market structure and competitive conditions in the Arab GCC banking system," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(12), pages 3487-3501, December.
  8. Jacob Bikker & Laura Spierdijk & Paul Finnie, 2006. "Misspecifiation of the Panzar-Rosse Model: Assessing Competition in the Banking Industry," DNB Working Papers, Netherlands Central Bank, Research Department 114, Netherlands Central Bank, Research Department.
  9. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 32(1), pages 121-41, February.
  10. David T. Llewellyn, 2005. "Competition and Profitability in European Banking: Why Are British Banks So Profitable?," Economic Notes, Banca Monte dei Paschi di Siena SpA, Banca Monte dei Paschi di Siena SpA, vol. 34(3), pages 279-311, November.
  11. Coccorese, Paolo, 2004. "Banking competition and macroeconomic conditions: a disaggregate analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 14(3), pages 203-219, July.
  12. Matthews, Kent & Murinde, Victor & Zhao, Tianshu, 2007. "Competitive conditions among the major British banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(7), pages 2025-2042, July.
  13. Stylianos Perrakis, 1991. "Assessing Competition in Canada's Financial System: A Note," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 24(3), pages 727-32, August.
  14. Hempell, Hannah S., 2002. "Testing for Competition Among German Banks," Discussion Paper Series 1: Economic Studies 2002,04, Deutsche Bundesbank, Research Centre.
  15. Alli Nathan & Edwin H. Neave, 1989. "Competition and Contestability in Canada's Financial System: Empirical Results," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 22(3), pages 576-94, August.
  16. Shaffer, Sherrill, 2004. "Comment on "What Drives Bank Competition? Some International Evidence" by Stijn Claessens and Luc Laeven," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(3), pages 585-92, June.
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