Open AccessWhat determines interbank competition? And why should we care?
Author(s) -
Colvin Christopher Louis
Publication year - 2009
Publication title -
oxonomics
Language(s) - English
Resource type - Journals
eISSN - 1752-5209
pISSN - 1752-5195
DOI - 10.1111/j.1752-5209.2009.00034.x
Subject(s) - interbank lending market , competition (biology) , market power , database transaction , financial stability , business , economics , measure (data warehouse) , transaction cost , monetary economics , industrial organization , market economy , financial system , microeconomics , market liquidity , ecology , programming language , database , computer science , biology , monopoly
. Traditional measures of competition are inappropriate for banking markets and there exists no consensus alternative measure. As a direct consequence, the empirical relationship between interbank competition and financial stability remains unclear. This paper adopts ideas from the new industrial organisation literature to measure interbank competition in the early twentieth‐century Dutch rural market for small‐scale deposits using newly collected data. It finds that transaction and information switching costs are both important sources of banks' market power.