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Bank competition, institution and economic development: Evidence from Asia during 1999-2007

Listed author(s):
  • Wahyoe Soedarmono


    (University of Limoges, LAPE, 5 rue Félix Eboué BP. 3127, 87031 Limoges, France)

From a sample of Asian countries over the period 1999-2007, this paper investigates the link between bank competition and economic development. In general, although banking market power has a U-shaped relationship with economic growth, banking market power tends to improve economic growth. However, the positive impact of banking market power on economic growth only occurs in agricultural sector, but not in industrial sector. It is also shown that higher banking market power in countries with greater economic freedom erodes overall economic growth and industrial growth. On the contrary, there is no significant relationship between banking market power and agricultural growth in countries with greater economic freedom. Therefore, when economic freedom increases and financial service investments come into a country, any policy to boost banking competition becomes necessary. In this phase, as well, industrial sector is more important than agricultural sector.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 3 ()
Pages: 2119-2133

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Handle: RePEc:ebl:ecbull:eb-10-00397
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  1. Agoraki, Maria-Eleni K. & Delis, Manthos D. & Pasiouras, Fotios, 2011. "Regulations, competition and bank risk-taking in transition countries," Journal of Financial Stability, Elsevier, vol. 7(1), pages 38-48, January.
  2. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 407-443.
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