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Competition in the Financial Sector; Overview of Competition Policies

  • Stijn Claessens

As in other sectors, competition in finance matters for allocative, productive and dynamic efficiency. Theory suggests, however, that unfettered competition is not first best given the special features of finance. I review these analytics and describe how to assess the degree of competition in markets for financial services. Existing research shows that the degree of competition greatly varies across markets, largely driven by barriers to entry and exit. I argue that changes in financial services industries require updated competition policies and institutional arrangements, but that practices still fall short. Furthermore, I show that developing countries face some specific competition challenges.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/45.

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Length: 20
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/45
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  1. Atif Mian, 2006. "Distance Constraints: The Limits of Foreign Lending in Poor Economies," Journal of Finance, American Finance Association, vol. 61(3), pages 1465-1505, 06.
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