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Testing for Competition in the Russian Banking Sector within Panzar-Rosse approach: theoretical and empirical framework

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  • Mamonov, Mikhail

    () (Center for Macroeconomic Analysis and Short-term Forecasting, Russia)

Abstract

This paper investigates the influence of both concentration and foreign banks expansion in Russian banking sector on the level of its competition. The estimation of competition is based on widely used non-structural methodology of Panzar-Rosse H-statistic (Rosse, Panzar, 1977; Panzar, Rosse, 1987) and draws upon a comprehensive panel data set of 525 Russian banks covering the period 2004q1–2009q4. From the one hand, the panel estimation outcome reveals a gradually increasing time trend for the H-statistic, thus suggesting an intensification of competition in the whole sector and among the large banks especially. From the other hand, the empirical evidence provided in this paper corroborates that foreign bank expansion strengthens competition and vice versa confirms the traditional view that concentration weakens competition

Suggested Citation

  • Mamonov, Mikhail, 2010. "Testing for Competition in the Russian Banking Sector within Panzar-Rosse approach: theoretical and empirical framework," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 20(4), pages 3-27.
  • Handle: RePEc:ris:apltrx:0012
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    References listed on IDEAS

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    1. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
    2. Yeyati, Eduardo Levy & Micco, Alejandro, 2007. "Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1633-1647, June.
    3. Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
    4. Shaffer, Sherrill & DiSalvo, James, 1994. "Conduct in a banking duopoly," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1063-1082, December.
    5. Mikhail Mamonov & Oleg Solntsev, 2009. "Foreign Banks Expansion to Russian Banking Sector: Interim Summation, Perspective Analysis Effort," Journal of the New Economic Association, New Economic Association, issue 1-2, pages 175-189.
    6. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
    7. Stijn Claessens & Luc Laeven, 2005. "Financial Dependence, Banking Sector Competition, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 179-207, March.
    8. Jacob Bikker & Laura Spierdijk & Paul Finnie, 2006. "Misspecifiation of the Panzar-Rosse Model: Assessing Competition in the Banking Industry," DNB Working Papers 114, Netherlands Central Bank, Research Department.
    9. Barros, Fatima & Modesto, Leonor, 1999. "Portuguese banking sector: a mixed oligopoly?," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 869-886, August.
    10. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," Review of Economic Studies, Oxford University Press, vol. 1(3), pages 157-175.
    11. Coccorese, Paolo, 2009. "Market power in local banking monopolies," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1196-1210, July.
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    Cited by:

    1. Mamonov, Mikhail, 2012. "The impact of market power of Russian banks on their credit risk tolerance: A panel study," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 28(4), pages 85-112.
    2. N. P. Pilnik & I. G. Pospelov & S. A. Radionov, 2020. "On Limits of the Influence of the Bank of Russia Key Rate on Indicators of the Russian Banking System," Studies on Russian Economic Development, Springer, vol. 31(2), pages 229-237, March.
    3. Mamonov, Mikhail, 2015. "Microeconomic modification of an industry-wide Boone indicator: Market power of Russian banks revisited," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 18-44.
    4. Darovskii, Ivan (Даровский, Иван), 2020. "Microeconomic and Macroeconomic Effects of the Banking Sector Development Policy in Russia [Отраслевые И Макроэкономические Эффекты Политики Оздоровления Российского Банковского Сектора]," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 30-61, August.

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    More about this item

    Keywords

    non-structural methodology of Panzar-Rosse; competition; Russian banking sector; static and dynamic panel data analysis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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