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Quantity versus Price Bank Competition and Macroeconomic Performance Given Bank Concentration

Author

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  • Varelas Erotokritos

    () (University of Macedonia, 54006 Thessaloniki, Greece)

Abstract

This paper elaborates upon the following three theses: First, given bank sector concentration, the other aspect of this sector that matters for the overall economy is that of price vs. quantity competition by itself. Second, the macroeconomic performance of price competition is superior, enhancing the tax base and bank profit, capitalizing additionally the banks upon public debt induced instability, which the policymaker can minimize through Taylor rule. And, third, the ultimate link between banking competition and macroeconomic performance is the bank regulation shaping bank operation in accordance with the financial needs of fiscal policy.

Suggested Citation

  • Varelas Erotokritos, 2015. "Quantity versus Price Bank Competition and Macroeconomic Performance Given Bank Concentration," Review of Economics, De Gruyter, vol. 66(3), pages 251-271, December.
  • Handle: RePEc:lus:reveco:v:66:y:2015:i:3:p:251-271
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    References listed on IDEAS

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    1. Charles Goodhart & Boris Hofmann & Miguel Segoviano, 2004. "Bank Regulation and Macroeconomic Fluctuations," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 591-615, Winter.
    2. Cetorelli, Nicola & Peretto, Pietro F., 2012. "Credit quantity and credit quality: Bank competition and capital accumulation," Journal of Economic Theory, Elsevier, vol. 147(3), pages 967-998.
    3. Repullo, Rafael, 2004. "Capital requirements, market power, and risk-taking in banking," Journal of Financial Intermediation, Elsevier, vol. 13(2), pages 156-182, April.
    4. Thankom Gopinath Arun & John Turner, 2009. "Corporate Governance of Banks in Developing Economies: Concepts and Issues," Chapters,in: Corporate Governance and Development, chapter 7 Edward Elgar Publishing.
    5. Douglas W. Diamond & Raghuram G. Rajan, 2006. "Money in a Theory of Banking," American Economic Review, American Economic Association, vol. 96(1), pages 30-53, March.
    6. Nicola Cetorelli, 2001. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Journal of Finance, American Finance Association, vol. 56(2), pages 617-648, April.
    7. Richard Breen & Cecilia García-Peñalosa, 2005. "Income Inequality and Macroeconomic Volatility: An Empirical Investigation," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 380-398, August.
    8. Kevin Moran & Cesaire A. Meh & Ian Christensen, 2010. "Bank Leverage Regulation and Macroeconomic Dynamics," 2010 Meeting Papers 757, Society for Economic Dynamics.
    9. Klaus Schaeck & Martin Cihak & Simon Wolfe, 2009. "Are Competitive Banking Systems More Stable?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 711-734, June.
    10. Ashraf, Quamrul & Gershman, Boris & Howitt, Peter, 2017. "Banks, market organization, and macroeconomic performance: An agent-based computational analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 143-180.
    11. Goodfriend, Marvin & McCallum, Bennett T., 2007. "Banking and interest rates in monetary policy analysis: A quantitative exploration," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1480-1507, July.
    12. Hoxha, Indrit, 2013. "The market structure of the banking sector and financially dependent manufacturing sectors," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 432-444.
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    Cited by:

    1. Eleni Dalla, 2017. "Monetary policy implications on the investment decision: Do economies of scope in the banking sector matter?," Discussion Paper Series 2017_05, Department of Economics, University of Macedonia, revised Mar 2017.
    2. Gerasimos T. SOLDATOS, 2017. "A formal look at the negative interbank rate," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 261-266, Spring.
    3. repec:agr:journl:v:xxiv:y:2017:i:1(610):p:261-266 is not listed on IDEAS

    More about this item

    Keywords

    bank competition; bank concentration; public debt; macroeconomic stability; monetary policy;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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