An Industrial Organization Analysis for the Colombian Banking System
AbstractThis paper presents two versions of a spatial competition model forthe 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 riskprobabilities for credit. Both theoretical approaches are analyzed em-pirically for the Colombian data,covering the period 1996-2005. Ourresults allow us to construct a deviation of the observed number ofbranches from an optimal number of branches for the banking systemthroughout the period of study. The deviation indicates that in thelast years the number of branches is below the optimum which sug-gest that political measures should focus in increasing the number ofbranches in the country. Additionally, we found empirical evidenceof market separability between the loan and deposit markets, and fi-nally, we were able to determine the signs of the relations betweencredit 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
Date of revision:
Contact details of provider:
Banking; Location; Competition; Colombia.;
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.
- D4 - Microeconomics - - Market Structure and Pricing
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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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