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http://ssrn.com/abstract=430604
 
 

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Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation


Asli Demirgüç-Kunt


World Bank - Financial and Private Sector Development; World Bank

Luc Laeven


International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Ross Levine


UC Berkeley; Milken Institute; National Bureau of Economic Research (NBER)

August 2003

NBER Working Paper No. w9890

Abstract:     
This paper examines the impact of bank regulations, market structure, and national institutions on bank net interest margins and overhead costs using data on over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation. Inflation also exerts a robust, positive impact on bank margins and overhead costs. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins and overhead expenditures. Thus, bank regulations cannot be viewed in isolation; they reflect broad, national approaches to private property and competition.

Number of Pages in PDF File: 65

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Date posted: August 5, 2003  

Suggested Citation

Demirgüç-Kunt, Asli and Laeven, Luc and Levine, Ross, Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation (August 2003). NBER Working Paper No. w9890. Available at SSRN: http://ssrn.com/abstract=430604

Contact Information

Asli Demirgüç-Kunt
World Bank - Financial and Private Sector Development ( email )
United States
202-473-7479 (Phone)
202-522-1155 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/
World Bank ( email )
1818 H Street, NW
Washington, DC 20433
United States
Luc A. Laeven
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Ross Levine (Contact Author)
UC Berkeley ( email )
545 Student Services Building
Berkeley, CA 94720
United States
Milken Institute ( email )
1250 Fourth Street
Santa Monica, CA 90401
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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