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Dynamic branching and interest rate competition of commercial banks: Evidence from Hungary

Listed author(s):
  • Temesvary, Judit

I supplement previous models of bank competition by incorporating the endogenous branching choices of commercial banks. I apply a dynamic structural model of banks' branching and interest rate choices to a unique bank-level dataset on Hungarian commercial banks during 2004–2007. I find that banks charge a premium in interest rates for relative branch network dominance, and banks with relatively smaller networks are less likely to close branches. I present significant and robust estimates of branch setup costs and scrap values, and discuss the potential use of branching restrictions as regulatory tools to alter lending rates and consumer surplus.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167718715001058
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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 43 (2015)
Issue (Month): C ()
Pages: 98-110

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Handle: RePEc:eee:indorg:v:43:y:2015:i:c:p:98-110
DOI: 10.1016/j.ijindorg.2015.09.003
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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