IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Bank market power and monetary policy transmission

Listed author(s):
  • Brissimis, Sophocles
  • Delis, Mannthos
  • Iosifidi, Maria

This paper examines empirically the role of bank market power as an internal factor influencing banks’ reaction in terms of lending and risk-taking to monetary policy impulses. The analysis is carried out for the US and euro-area banking sectors over the period 1997-2010. Market power is estimated at the bank-year level, using a method that allows the efficient estimation of marginal cost of banks also at the bank-year level. The findings show that banks with even moderate levels of market power are able to buffer the negative impact of a monetary policy change on bank loans and credit risk. This effect is somewhat more pronounced in the euro area compared to the US. However, following the subprime mortgage crisis of 2007, the level of market power needed to shield bank loans and credit risk from the impact of a change in monetary policy increased substantially. This is clear evidence that the financial crisis reinforced the mechanisms of the bank lending and the risk-taking channels.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/49206/1/MPRA_paper_49206.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49206.

as
in new window

Length:
Date of creation: 31 Dec 2012
Handle: RePEc:pra:mprapa:49206
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
  2. Baglioni, Angelo, 2007. "Monetary policy transmission under different banking structures: The role of capital and heterogeneity," International Review of Economics & Finance, Elsevier, vol. 16(1), pages 78-100.
  3. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  4. Boone, Jan, 2004. "A New Way to Measure Competition," CEPR Discussion Papers 4330, C.E.P.R. Discussion Papers.
  5. Alexander Schiersch & Jens Schmidt-Ehmcke, 2010. "Empiricism Meets Theory: Is the Boone-Indicator Applicable?," Discussion Papers of DIW Berlin 1030, DIW Berlin, German Institute for Economic Research.
  6. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  7. J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued) 68, Netherlands Central Bank.
  8. Lensink, Robert & Sterken, Elmer, 2002. "Monetary transmission and bank competition in the EMU," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2065-2075, November.
  9. J.A. Bikker & S. Shaffer & L. Spierdijk, 2009. "Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium," Working Papers 09-27, Utrecht School of Economics.
  10. Kiminori Matsuyama, 2007. "Credit Traps and Credit Cycles," American Economic Review, American Economic Association, vol. 97(1), pages 503-516, March.
  11. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  12. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1581-1603, May.
  13. Claudio Borio & Haibin Zhu, 2008. "Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?," BIS Working Papers 268, Bank for International Settlements.
  14. Gambacorta, Leonardo & Marqués-Ibáñez, David, 2011. "The bank lending channel: lessons from the crisis," Working Paper Series 1335, European Central Bank.
  15. Andreas Savvides & Theofanis P. Mamuneas & Thanasis Stengos, 2006. "Economic development and the return to human capital: a smooth coefficient semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 111-132.
  16. Delis, Manthos D & Kouretas, Georgios, 2010. "Interest rates and bank risk-taking," MPRA Paper 20132, University Library of Munich, Germany.
  17. Brissimis, Sophocles N. & Magginas, Nicholas S., 2005. "Changes in financial structure and asset price substitutability: A test of the bank lending channel," Economic Modelling, Elsevier, vol. 22(5), pages 879-904, September.
  18. Jiménez, Gabriel & Ongena, Steven & Peydró, José Luis & Saurina, Jesús, 2007. "Hazardous Times for Monetary Policy: What Do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?," CEPR Discussion Papers 6514, C.E.P.R. Discussion Papers.
  19. Adam B. Ashcraft, 2001. "New evidence on the lending channel," Staff Reports 136, Federal Reserve Bank of New York.
  20. Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank.
  21. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  22. Sofronis Clerides & Manthos D. Delis & Sotirios Kokas, 2013. "A new data set on competition in national banking markets," University of Cyprus Working Papers in Economics 08-2013, University of Cyprus Department of Economics.
  23. John C. Driscoll, 2003. "Does bank lending affect output? evidence from the U.S. states," Finance and Economics Discussion Series 2003-31, Board of Governors of the Federal Reserve System (U.S.).
  24. Adam B. Ashcraft, 2005. "Are Banks Really Special? New Evidence from the FDIC-Induced Failure of Healthy Banks," American Economic Review, American Economic Association, vol. 95(5), pages 1712-1730, December.
  25. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
  26. Delis, Manthos D., 2012. "Bank competition, financial reform, and institutions: The importance of being developed," Journal of Development Economics, Elsevier, vol. 97(2), pages 450-465.
  27. Brissimis, Sophocles N. & Delis, Manthos D., 2009. "Identification of a loan supply function: A cross-country test for the existence of a bank lending channel," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(2), pages 321-335, April.
  28. DellAriccia, Giovanni & Marquez, Robert, 2005. "Lending Booms and Lending Standards," CEPR Discussion Papers 5095, C.E.P.R. Discussion Papers.
  29. Charles Kahn & Ben Sopranzetti, 2005. "Bank Consolidation and the Dynamics of Consumer Loan Interest Rates," The Journal of Business, University of Chicago Press, vol. 78(1), pages 99-134, January.
  30. Michael Koetter & James W. Kolari & Laura Spierdijk, 2012. "Enjoying the Quiet Life under Deregulation? Evidence from Adjusted Lerner Indices for U.S. Banks," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 462-480, May.
  31. Li, Qi, et al, 2002. "Semiparametric Smooth Coefficient Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 412-422, July.
  32. Raghuram G. Rajan, 2006. "Has Finance Made the World Riskier?," European Financial Management, European Financial Management Association, vol. 12(4), pages 499-533.
  33. Brissimis, Sophocles N. & Delis, Manthos D. & Papanikolaou, Nikolaos I., 2008. "Exploring the nexus between banking sector reform and performance: Evidence from newly acceded EU countries," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2674-2683, December.
  34. Delis, Manthos D & Iosifidi, Maria & Tsionas, Efthymios, 2012. "On the estimation of marginal cost," MPRA Paper 43514, University Library of Munich, Germany.
  35. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
  36. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
  37. Delis, Manthos D & Hasan, Iftekhar & Mylonidis, Nikolaos, 2011. "The risk-taking channel of monetary policy in the USA: Evidence from micro-level data," MPRA Paper 34084, University Library of Munich, Germany.
  38. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
  39. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49206. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.