An Industrial Organization Analysis for the Colombian Banking System
AbstractThis paper presents two versions of a spatial competition model for the banking sector. The first version, describes a framework that fol- lows closely Salop’s spatial competition model. This version is modi- fied in the second part by introducing the loan market and default risk probabilities for credit. Both theoretical approaches are analyzed em- pirically for the Colombian data,covering the period 1996-2005. Our results allow us to construct a deviation of the observed number of branches from an optimal number of branches for the banking system throughout the period of study. The deviation indicates that in the last years the number of branches is below the optimum which sug- gest that political measures should focus in increasing the number of branches in the country. Additionally, we found empirical evidence of market separability between the loan and deposit markets, and fi- nally, we were able to determine the signs of the relations between credit collateral, payment probability and interest rates.
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Bibliographic InfoPaper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 005001.
Date of creation: 26 Aug 2008
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Other versions of this item:
- Sandra Rozo & Diego Vásquez & Dairo Estrada, . "An Industrial Organization Analysis for the Colombian Banking System," Borradores de Economia 528, Banco de la Republica de Colombia.
- Col - Mathematical and Quantitative Methods - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-05 (All new papers)
- NEP-BAN-2008-09-05 (Banking)
- NEP-COM-2008-09-05 (Industrial Competition)
- NEP-IND-2008-09-05 (Industrial Organization)
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