Are More Competitive Banking Systems More Stable?

Author/Editor:

Martin Cihak ; Simon Wolfe ; Klaus Schaeck

Publication Date:

June 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides the first empirical analysis of the cross-country relationship between a direct measure of competitive conduct of financial institutions and banking system fragility. Using the Panzar and Rosse H-Statistic as a measure for competition in 38 countries during 1980-2003, we present evidence that more competitive banking systems are less prone to systemic crises and that time to crisis is longer in a competitive environment. Our results hold when concentration and the regulatory environment are controlled for and are robust to different methodologies, different sampling periods, and alternative samples.

Series:

Working Paper No. 06/143

Subject:

English

Publication Date:

June 1, 2006

ISBN/ISSN:

9781451864038/1018-5941

Stock No:

WPIEA2006143

Format:

Paper

Pages:

37

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