Assessing Banking Competition: An Application to the Spanish Market for (Quality-Changing) Deposits

24 Pages Posted: 30 Aug 2006

Date Written: August 30, 2006

Abstract

Taking the Spanish market for deposits as a case study we show the importance of properly controlling for the quality of the services provided when assessing the degree of banking competition. While a simple approach based on estimating the price elasticity of the residual supply of deposit funds faced by banks does not reveal any increase in competition, such an increase is clear when the interest rate on deposits is "corrected" according to the behaviour of variables that proxy the quality of the different services embedded in a bank deposit.

Keywords: Banking competition, panel data, service quality

JEL Classification: G21, D40

Suggested Citation

Ayuso, Juan and Martínez Pagés, Jorge, Assessing Banking Competition: An Application to the Spanish Market for (Quality-Changing) Deposits (August 30, 2006). Banco de Espana Research Paper No. WP-0623. Available at SSRN: https://ssrn.com/abstract=927391 or http://dx.doi.org/10.2139/ssrn.927391

Juan Ayuso (Contact Author)

Banco de España ( email )

Alcala 50
Servicio de Estudios
28014 Madrid
Spain
+34 91 338 5735 (Phone)
+34 91 338 5624 (Fax)

Jorge Martínez Pagés

Banco de España ( email )

Madrid 28014
Spain

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