Download or read book Crisis in Competitive Versus Monopolistic Banking Systems written by Mr.Bruce D. Smith and published by International Monetary Fund. This book was released on 2003-09-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a monetary, general equilibrium economy in which banks exist because they provide intertemporal insurance to risk-averse depositors. A "banking crisis" is defined as a case in which banks exhaust their reserve assets. Under different model specifications, the banking industry is either a monopoly bank or a competitive banking industry. If the nominal rate of interest (rate of inflation) is below (above) some threshold, a monopolistic banking system will always result in a higher (lower) crisis probability. Thus, the relative crisis probabilities under the two banking systems cannot be determined independently of the conduct of monetary policy. We further show that the probability of a "costly banking crisis" is always higher under competition than under monopoly. However, this apparent advantage of the monopoly bank is due strictly to the fact that it provides relatively less valuable intertemporal insurance. These theoretical results suggest that banking system structure may matter for financial stability.

Download or read book Crises in Competitive Versus Monopolistic Banking Systems written by John H. Boyd and published by . This book was released on 2008 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a monetary, general equilibrium economy in which banks exist because they provide intertemporal insurance to risk-averse depositors. A quot;banking crisisquot; is defined as a case in which banks exhaust their reserve assets. Under different model specifications, the banking industry is either a monopoly bank or a competitive banking industry. If the nominal rate of interest (rate of inflation) is below (above) some threshold, a monopolistic banking system will always result in a higher (lower) crisis probability. Thus, the relative crisis probabilities under the two banking systems cannot be determined independently of the conduct of monetary policy. We further show that the probability of a quot;costly banking crisisquot; is always higher under competition than under monopoly. However, this apparent advantage of the monopoly bank is due strictly to the fact that it provides relatively less valuable intertemporal insurance. These theoretical results suggest that banking system structure may matter for financial stability.

Download or read book Are More Competitive Banking Systems More Stable written by Martin Cihák and published by International Monetary Fund. This book was released on 2006-06 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides the first empirical analysis of the cross-country relationship between a direct measure of competitive conduct of financial institutions and banking system fragility. Using the Panzar and Rosse H-Statistic as a measure for competition in 38 countries during 1980-2003, we present evidence that more competitive banking systems are less prone to systemic crises and that time to crisis is longer in a competitive environment. Our results hold when concentration and the regulatory environment are controlled for and are robust to different methodologies, different sampling periods, and alternative samples.

Download or read book Thoughts on Entry Regulation Financial Market Competition and Financial Crisis written by Sven Lilienthal and published by GRIN Verlag. This book was released on 2009-04 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2009 in the subject Business economics - Economic Policy, grade: 1,0, University of Frankfurt (Main), course: Financial Regulation, language: English, abstract: This paper deals with the terms entry regulation, financial market competition and also indicates connections to potential financial crises. Authors in research have been attempting for years to build up a remedy for an optimal set-up.1 So, this is the reason I observe a seemingly never-ending discussion between two unofficial parties: Neither the proponents of the concentration-stability view, neither those of the concentration-fragility view will retreat from how to install proper competition in order to ensure stability. This paper also aims to understand the terms of both parties; their arguments and whether either monopolistic structures or competition are desirable in the financial industry. Therefore, I lay the theoretical foundation. I demonstrate with a model of the authors Boyd & De Nicoló that even economies with monopolistic structure are exposed to risk-taking activities - and not only banks in competitive industries. In chapter 3, I turn to the topic "Entry Regulation". I unveil different yardsticks of entry regulation, reveal some advantages and draw up my own index. I show that mainly countries that suffered devastating crises in recent times have stringent entry regulation. This can be shown by regarding their high capital requirements or their barriers for submitting information of managers, future plans or composition of shareholders. I also show that entry regulation is an appropriate means for governments to control or to curb competition. In the last chapter, it is also shown that high entry capital requirements prevent mainly weak or inefficient banks from entry. In chapter 4, I present two ratios for assessing competition: The concentration ratio (CR) and H-Statistics (H). CR is widely used in literature and defines the market share of the largest banks

Download or read book Fragile by Design written by Charles W. Calomiris and published by Princeton University Press. This book was released on 2014-02-23 with total page 585 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why stable banking systems are so rare Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues. Fragile by Design is a revealing exploration of the ways that politics inevitably intrudes into bank regulation.

Download or read book Bank Concentration and Crises written by Thorsten Beck and published by . This book was released on 2003 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by public policy debates about bank consolidation and conflicting theoretical predictions about the relationship between the market structure of the banking industry and bank fragility, this paper studies the impact of bank concentration, bank regulations, and national institutions on the likelihood of suffering a systemic banking crisis. Using data on 70 countries from 1980 to 1997, we find that crises are less likely in economies with (i) more concentrated banking systems, (ii) fewer regulatory restrictions on bank competition and activities, and (iii) national institutions that encourage competition.

Download or read book Bank Monopoly The Cause Of Commercial Crises written by George Guthrie and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this provocative work, economist George Guthrie argues that the monopoly held by banks over the issuance of credit is the root cause of recurring commercial crises. Drawing on case studies from throughout history, Guthrie shows how this monopoly has caused inflation, instability, and social unrest. With its sharp critiques of the banking system and visionary proposals for reform, this book is a must-read for anyone interested in economics and finance. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.

Download or read book Competition and Monopoly in the Federal Reserve System 1914 1951 written by Mark Toma and published by Cambridge University Press. This book was released on 1997-05-08 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book emphasizes the evolution of the Federal Reserve from a competitive to a monopolistic structure.

Download or read book Consolidation and Market Structure in Emerging Market Banking Systems written by Gaston Gelos and published by International Monetary Fund. This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monopoly and Competition in Banking written by David A. Alhadeff and published by . This book was released on 1954 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Banks on the Brink written by Mark Copelovitch and published by . This book was released on 2020 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: This innovative analysis investigates a complex issue of tremendous economic and political importance: what makes some countries vulnerable to banking crises, while others emerge unscathed? Banks on the Brink explains why some countries are more vulnerable to banking crises than others. Copelovitch and Singer highlight the effects of two variables in combination: foreign capital inflows and the relative prominence of securities markets in the domestic financial system. Foreign capital is the fuel for banks' potentially dangerous behavior, and banks are more likely to take on excessive risks when operating in a financial system with large securities markets. The book analyzes over thirty years of data and provides historical case studies of two key countries, Canada and Germany, each of which explores how political decisions in the 19th and early-20th centuries continue to affect financial stability today. The analyses in this book have crucial policy implications, identifying potential regulations and policies that can work to protect banking systems against future crises. • Stresses the under-explored relationship between banking systems, securities markets, and financial crises, illuminating the profound impact of factors on subsequent crises • Highlights the impact politics has on the development of a nation's financial markets, across space and time, in order to point out when and why banking systems become more prone to crisis • Uses comprehensive data analysis, in tandem with two historical case studies, Canada and Germany, in order to expand the study of financial crises beyond singular events and focus on enduring, institutional factors

Download or read book Essays on Financial Stability and the Industrial Organization of the Banking System written by Jiahong Gao and published by . This book was released on 2020 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: The focus of my dissertation is to study how the industrial organization of the banking sector affects the risk-taking behavior of financial intermediaries and the degree of instability within the banking system. In the first chapter, I ask whether the notion that market concentration promotes stability survives when the government intervention during a crisis is properly taken into account. To this end, I study suspension policies in an environment without commitment, following Ennis and Keister (2009). When the BA only values the welfare of depositors, the degree of fragility is independent of the competitive structure of the banking system. However, having a BA that puts some weight on the monopolist's welfare can serve as a commitment device in suspending payments earlier to protect bank profits, which reduces fragility under a monopoly. The second chapter investigates how the industrial organization of the banking sector may be associated with different triggers for the system to be unstable. In particular, my analysis is based on a modern version of the Diamond and Dybvig (1983) framework in which a self-fulfilling run occurs at a non-trivial probability and banks lack commitment in determining the structure of liabilities as in Ennis and Keister (2010). I find that the possibility that the monopolistic bank may lose its rents in times of stress encourages it to be relatively illiquid. As a result, a monopoly is more stable (fragile) than perfect competition if the ex-ante probability of a financial crisis is below (above) some threshold. The last chapter examines the effects of bank failures and market concentration on credit market activity across United States. In particular, I employ a recent 17-year panel of all FDIC-insured commercial banks over the period 1994Q3 to 2010Q4 and construct state-specific measures of bank failures and deposit concentration. Using a seemingly unrelated regressions (SUR) model, I find that over the full sample, banks issued less loans if the likelihood of a bank failure in a given state increased. Further, banks in states with higher degrees of concentration also issued less loans. Interestingly, there appears evidence that market concentration serves as a buffer against instability.

Download or read book Inside and Outside Liquidity written by Bengt Holmstrom and published by MIT Press. This book was released on 2013-01-11 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.

Download or read book Regulatory Cycles Revisiting the Political Economy of Financial Crises written by Jihad Dagher and published by International Monetary Fund. This book was released on 2018-01-15 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.

Download or read book Bank Competition and Financial Stability written by Mr.Gianni De Nicolo and published by International Monetary Fund. This book was released on 2011-12-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy.

Download or read book Do Brazilian Banks Compete written by Ms.Agnes Belaisch and published by International Monetary Fund. This book was released on 2003-06-01 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: More developed financial systems are associated with higher investment and better economic performance. This paper discusses possible factors that may inhibit a deepening of bank intermediation and more efficient banking in Brazil, two aspects that are found to be significantly different than in leading banking systems in other parts of the world. Using panel data, it finds positive evidence of the presence of a noncompetitive market structure in the Brazilian banking system, a factor that could explain why intermediation may be relatively low and costly. When banks behave like local monopolies or oligopolies, incentives to improve efficiency are weak and the interest rate spread is large, discouraging higher lending volumes.

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.