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Foreign Competition and Banking Industry Dynamics

Author

Listed:
  • Dean Corbae

    (University of Wisconsin)

  • Pablo D'Erasmo

    (FRB Philadelphia)

Abstract

We develop a simple general equilibrium framework to study the effects of global competition on banking industry dynamics and welfare. We apply the framework to the Mexican banking industry, which underwent a major structural change in the 1990s as a consequence of both government policy and external shocks. Given high concentration in the Mexican banking industry, domestic and foreign banks act strategically in our framework. After calibrating the model to Mexican data, we examine the welfare consequences of government policies which promote global competition. We find modest welfare gains for households and substantial gains for business.

Suggested Citation

  • Dean Corbae & Pablo D'Erasmo, 2015. "Foreign Competition and Banking Industry Dynamics," 2015 Meeting Papers 1205, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1205
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    References listed on IDEAS

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    Cited by:

    1. Alan Finkelstein Shapiro & Brendan Epstein, 2018. "Banking and Financial Access Reforms, Labor Markets, and Financial Shocks," 2018 Meeting Papers 2, Society for Economic Dynamics.
    2. Dean Corbae & Pablo D'Erasmo, 2014. "Capital requirements in a quantitative model of banking industry dynamics," Working Papers 14-13, Federal Reserve Bank of Philadelphia.
    3. Epstein, Brendan & Finkelstein Shapiro, Alan, 2017. "Banking and Financial Participation Reforms, Labor Markets, and Financial Shocks," MPRA Paper 88697, University Library of Munich, Germany.
    4. Müting, Miriam, 2020. "Multinational lending retrenchment after the global financial crisis: The impact of policy interventions," Discussion Papers in Economics 72612, University of Munich, Department of Economics.
    5. Felipe Meza & Sangeeta Pratap & Carlos Urrutia, 2019. "Credit, Misallocation and Productivity: A Disaggregated Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 61-86, October.

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