Banking Competition and Stability: Evidence from Inter-Continental Markets

Rafay, Abdul; Gilani, Usman

Banking Competition and Stability: Evidence from Inter-Continental Markets

Rafay, A. & Gilani, U. J. (2016). Banking Competition and Stability: Evidence from Inter-continental Markets. DLSU Business and Economics Review, 25(2),24-40

19 Pages Posted: 29 Jan 2016 Last revised: 4 Mar 2021

See all articles by Abdul Rafay

Abdul Rafay

University of Management & Technology (UMT), Pakistan

Usman Gilani

University of Leeds – Division of Accounting and Finance

Date Written: January 29, 2016

Abstract

In this paper partial adjustment process to Panzar and Rosse's (1987) H-Statistics is introduced. The basic aim is to estimate the speed at which the EU, US, and ANZ banking markets adjust to their long-run equilibrium levels. Normally, banking markets adjust towards long-run equilibrium in a non-instantaneous manner. Moreover, while estimating the market structure, the speed of adjustment process is taken into account. We introduced an empirical model based on Nerlove's (1956) partial adjustment model to capture the speed of convergence of transition in the EU, US and ANZ banking market. Empirical results suggest that the transition and speed of adjustment towards long-run equilibrium varies from market to market depending on the profit deviation from average market profits.

Keywords: Adjustment Speed, Banking, Competition, H-Statistics, Partial adjustment model

JEL Classification: L11, N20

Suggested Citation: Suggested Citation

Rafay, Abdul and Gilani, Usman Javed, Banking Competition and Stability: Evidence from Inter-Continental Markets (January 29, 2016). Rafay, A. & Gilani, U. J. (2016). Banking Competition and Stability: Evidence from Inter-continental Markets. DLSU Business and Economics Review, 25(2),24-40, Available at SSRN: https://ssrn.com/abstract=2724521