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Testing for competition in the South African banking sector


  • Simbanegavi, Witness
  • Greenberg, Josh
  • Gwatidzo, Tendai


This paper employs the Panzar and Rosse (1987) and the Bresnahan models to determine the level of competition in the South African banking sector. This level of competition was tested during the period 1998 to 2008 for the Panzar and Rosse approach and from 1992 to 2008 for the Bresnahan model. We �find evidence of monopolistic competition in the South African banking sector. Our fi�ndings are consistent with those of Bikker et al (2012) for South Africa.

Suggested Citation

  • Simbanegavi, Witness & Greenberg, Josh & Gwatidzo, Tendai, 2012. "Testing for competition in the South African banking sector," MPRA Paper 43627, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43627

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    References listed on IDEAS

    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. Michiel van Leuvensteijn & Christoffer Kok Sørensen & Jacob A. Bikker & Adrian A.R.J.M. van Rixtel, 2013. "Impact of bank competition on the interest rate pass-through in the euro area," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1359-1380, April.
    3. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    4. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
    5. Shrimal Perera & Michael Skully & J. Wickramanayake, 2006. "Competition and structure of South Asian banking: a revenue behaviour approach," Applied Financial Economics, Taylor & Francis Journals, vol. 16(11), pages 789-801.
    6. Albaek, Svend & Mollgaard, Peter & Overgaard, Per B, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 429-443, December.
    7. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-299, May.
    8. 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.
    9. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
    10. 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.
    11. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February.
    12. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-583, June.
    13. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    14. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
    15. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323.
    16. Shaffer, Sherrill, 2001. "Banking conduct before the European single banking license: a cross-country comparison," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 79-104, March.
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    Cited by:

    1. Andrew Maredza and Sylvanus Ikhide, 2013. "The Impact of the Global Financial Crisis on Efficiency and Productivity of the Banking System in South Africa," Working Papers 328, Economic Research Southern Africa.
    2. repec:eee:riibaf:v:41:y:2017:i:c:p:412-422 is not listed on IDEAS

    More about this item


    banking industry; competition; South Africa; Panzar-Rosse model; Bresnahan model;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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