Counterfactual Analysis of Bank Mergers
Pedro P. Barros
Universidade Nova de Lisboa
Banco de Portugal
NYU Shanghai; University of Haifa - Department of Economics
Nuno C. Martins
Bank of Portugal; Universidade Nova de Lisboa
July 16, 2010
Empirical Economics, Vol. 46, No. 1, 2014
Estimating the impact of bank mergers requires a framework distinguishing endogenous changes in market structure and conduct from exogenous changes. Conventionally, the literature relies on differential analysis, considering market structure as exogenous by using concentration indexes such as the HHI. We introduce an econometric methodology relying on a structural model of the credit market from which we derive a counterfactual scenario of what would have happened if mergers had not occurred. We find that mergers increased firms' access to credit, but had an opposite effect on households. Moreover, we find that mergers led to a widespread decrease in interest rates.
Number of Pages in PDF File: 41
Keywords: banks, mergers, competition
JEL Classification: G21, G34, L10
Date posted: July 24, 2010 ; Last revised: October 21, 2014
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