A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary

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A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary

Author Info

József Molnár () (Bank of Finland)
Márton Nagy () (Magyar Nemzeti Bank)
Csilla Horváth () (Radboud University Nijmegen, The Netherlands)

Additional information is available for the following registered author(s):

Jozsef Molnar

Abstract

In this paper we analyze the degree of competition in the Hungarian household credit and deposit markets. We estimate discrete-choice, multinomial logit deposit service and loan demand functions for each bank and calculate the corresponding price elasticities. Two models of the banking industry are considered: a static, differentiated product Nash-Bertrand oligopoly (as non-collusive benchmark) and a cartel. With estimated marginal costs and observed interest rates we calculate the price-cost margins and compare these to the theoretically implied ones. We find that in our sample period the competition in the Hungarian banking sector is low, i.e. price-cost margins are high.

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Paper provided by Magyar Nemzeti Bank (The Central Bank of Hungary) in its series MNB Working Papers with number 2007/1.

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Length: 44 pages
Date of creation: 2007
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Handle: RePEc:mnb:wpaper:2007/1

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-03-10 (All new papers)
NEP-BAN-2007-03-10 (Banking)
NEP-COM-2007-03-10 (Industrial Competition)
NEP-DCM-2007-03-10 (Discrete Choice Models)
NEP-MIC-2007-03-10 (Microeconomics)

References listed on IDEAS
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.:

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Full references

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.)

KV, Bhanu Murthy & Deb, Ashis Taru, 2008. "Theoretical Framework Of Competition As Applied To Banking Industry," MPRA Paper 7465, University Library of Munich, Germany. [Downloadable!]
Molnár, József, 2008. "Market power and merger simulation in retail banking," Research Discussion Papers 4/2008, Bank of Finland. [Downloadable!]

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