What Affects Bank Market Power in the Euro Area? A Structural Model Approach

37 Pages Posted: 27 Jan 2021

See all articles by Paolo Coccorese

Paolo Coccorese

University of Salerno - Dept. of Economics and Statistics

Claudia Girardone

Essex Business School - University of Essex

Sherrill Shaffer

University of Wyoming

Date Written: January 27, 2021

Abstract

In this study we explore market power in 13 EU banking sectors for the years 2007 to 2019 by estimating a structural model with demand and supply equations, where the mark-up of price over marginal cost is parameterized as a measure of banks’ conduct that depends on selected factors. Our evidence indicates that EU banks enjoy a significant degree of market power, which shows a decreasing trend over time and some difference across countries. More competition is associated with higher bank density, lower bank capitalization, more efficient and stable banking systems, and better macroeconomic conditions. Finally, a clear convergence pattern emerges in the behaviour of EU banks.

Keywords: Banking, Market power, European integration

JEL Classification: C36, F36, G21, L10

Suggested Citation

Coccorese, Paolo and Girardone, Claudia and Shaffer, Sherrill, What Affects Bank Market Power in the Euro Area? A Structural Model Approach (January 27, 2021). CAMA Working Paper No. 15/2021, Available at SSRN: https://ssrn.com/abstract=3773920 or http://dx.doi.org/10.2139/ssrn.3773920

Paolo Coccorese

University of Salerno - Dept. of Economics and Statistics ( email )

Via Giovanni Paolo II, 132
Fisciano, SA 84084
Italy

Claudia Girardone

Essex Business School - University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206874156 (Phone)
+44 1206873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=1045

Sherrill Shaffer (Contact Author)

University of Wyoming ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States
307-766-2173 (Phone)
307-766-5090 (Fax)

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