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Bank Industry Structure and Public Debt

Listed author(s):
  • Varelas, Erotokritos

Based on a traditional approach to the behavior of a bank which lends both private and public sector, and utilizing a typical expression for public debt accumulation, this paper concludes that the optimality of the number and size of banks depends heavily on the course of the public debt, ceteris paribus. If the intergenerational dimension of the public debt is assumed away, fiscal consolidation presupposes a limited number of banks under normal only profit, a sort of quasi-competitive banking. In the presence of intergenerational considerations, fiscal consideration requires a few efficient banks experiencing perhaps positive profit, which is consistent with the notion of workable competition. Consequently, the pre-consolidation size distribution of banks is immaterial policy-wise.

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File URL: https://mpra.ub.uni-muenchen.de/58437/1/MPRA_paper_58437.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 58437.

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Date of creation: 2014
Handle: RePEc:pra:mprapa:58437
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  1. Xiaolan Zheng & Sadok El Ghoul & Omrane Guedhami & Chuck C Y Kwok, 2013. "Collectivism and corruption in bank lending," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(4), pages 363-390, May.
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  8. Thakor, Anjan V., 1996. "The design of financial systems: An overview," Journal of Banking & Finance, Elsevier, vol. 20(5), pages 917-948, June.
  9. Xavier Freixas & Jean-Charles Rochet, 2008. "Microeconomics of Banking, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062704, January.
  10. Dean A. Worcester & Jr., 1957. "Why "Dominant Firms" Decline," Journal of Political Economy, University of Chicago Press, vol. 65, pages 338-338.
  11. Paolo Coccorese, 2002. "Competition Among Dominant Firms in Concentrated Markets: Evidence from the Italian Banking Industry," CSEF Working Papers 89, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  12. Bruce C. Cohen, 1970. "Deposit Demand and the Pricing of Demand Deposits," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 523-529.
  13. White, L.J., 1996. "The Rise and Fall of Dominant Firms in the U.S. Automobile Industry: A Twice Told Tale," Working Papers 96-12, New York University, Leonard N. Stern School of Business, Department of Economics.
  14. Gautam Gowrisankaran & Thomas J. Holmes, 2004. "Mergers and the Evolution of Industry Concentration: Results from the Dominant-Firm Model," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 561-582, Autumn.
  15. Tarishi Matsuoka, 2011. "Monetary Policy and Banking Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(6), pages 1109-1129, 09.
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