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Banking Competition and Financial Stability: Evidence from CIS Countries

Author

Listed:
  • Cavid Nabiyev

    (Central Bank of Azerbaijan Republic)

  • Kanan Musayev

    (Central Bank of Azerbaijan Republic)

  • Leyla Yusifzada

    (Central Bank of Azerbaijan Republic)

Abstract

The study provides empirical analysis of the cross-country relationship between a direct measure of competitive conduct of banking system and financial system in CIS countries during the period from 2001 to 2013. We determine the level of banking competition by using Panzar and Rosse H-statistic. Estimation results from Logit probability analysis reveal that the level of competition does not significantly affect the probability of banking crisis in such countries. However, a number of macroeconomic and institutional factors have a significant influence in financial stability. According to empirical results, higher inflation increases the probability of a banking crisis. On the other hand, credit growth decreases the probability of banking crisis in the investigated countries. These results are robust to the methodology when the interaction of concentration and h-statistic is used. The institutional factors have significant influence on preventing banking crises. Specifically, improvement in government effectiveness decreases the probability of banking crisis.

Suggested Citation

  • Cavid Nabiyev & Kanan Musayev & Leyla Yusifzada, 2016. "Banking Competition and Financial Stability: Evidence from CIS Countries," Working Papers 1604, Central Bank of Azerbaijan Republic.
  • Handle: RePEc:aze:wpaper:1604
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    References listed on IDEAS

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    More about this item

    Keywords

    banking competition; concentration; competition-stability; competition-fragility; h-statistics; financial stability;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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