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Bank Competition, Borrower Competition and Interest Rates

  • Carlos Bellón

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    The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.

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    File URL: http://e-archivo.uc3m.es/bitstream/handle/10016/19007/indemwp14_03.pdf?sequence=1
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    Paper provided by Universidad Carlos III, Instituto sobre Desarrollo Empresarial (INDEM) in its series Business Economics Working Papers with number id-14-03.

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    Date of creation: Jun 2014
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    Handle: RePEc:cte:idrepe:id-14-03
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