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The political economy of foreign bank entry and its impact: theory and a case study

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Author Info
Gabriella Montinola
Ramon Moreno

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Abstract

We apply Becker's (1983) model of lobbying to show that liberalization of foreign bank entry may result from political changes and a fall in domestic bank efficiency caused by lack of competition, which raises the costs to domestic banks of restricting foreign bank entry. We also show that in equilibrium, reform may be too limited to improve efficiency. We use this model and Data Envelopment Analysis techniques to interpret the liberalization of foreign bank entry in the Philippines in 1994. Declines in banking efficiency reduced resistance to foreign bank entry, but the effects of liberalization on efficiency were modest.

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Paper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 01-11.

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Date of creation: 2001
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Handle: RePEc:fip:fedfpb:01-11

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Keywords: Monetary policy - East Asia ; Inflation (Finance);

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    Other versions:
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    Other versions:
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    Other versions:
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  25. Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-47, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pasadilla, Gloria & Milo, Melanie S., 2005. "Effect of Liberalization on Banking Competition," Discussion Papers DP 2005-03, Philippine Institute for Development Studies. [Downloadable!]
  2. Manlagnit, Ma. Chelo V. & Lamberte, Mario B., 2004. "Evaluating the Impacts of Competition Policy Reforms on the Efficiency of Philippine Commercial Banks," Discussion Papers DP 2004-46, Philippine Institute for Development Studies. [Downloadable!]
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