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The effect of monetary policy on bank competition using the Boone index

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journal contribution
posted on 17.10.2019, 15:27 by Anthony Glass, Karligash GlassKarligash Glass, Tom Weyman-Jones
An interesting strand of the theoretical literature on measuring competition posits that when competition increases in an industry, output is reallocated to more efficient firms. Our first contribution is on the methodology for the empirical implementation of this theoretical test of a change in competition. This contribution moves from the relationship between a change in competition and a single all-encompassing efficiency, to a set of relationships between a change in competition and multiple efficiencies that measure different components of economic performance. Our second contribution is to apply our empirical methodology to large U.S. banks. The results suggest that competition intensified between these banks during the financial crisis and beyond (2008 - 15), vis-à-vis our pre-crisis period (1994 - 07). This points to an increase in competition that has exogenous origins such as the decrease in the loan-deposit rate spread, which represented the collateral damage to banks from monetary policy to moderate the Great Recession.

History

School

  • Business and Economics

Department

  • Economics

Published in

European Journal of Operational Research

Volume

282

Issue

3

Pages

1070-1087

Publisher

Elsevier

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier

Publisher statement

This paper was accepted for publication in the journal European Journal of Operational Research and the definitive published version is available at https://doi.org/10.1016/j.ejor.2019.10.022.

Acceptance date

07/10/2019

Publication date

2019-11-05

Copyright date

2020

ISSN

0377-2217

Language

en

Depositor

Dr Karligash Glass. Deposit date: 16 October 2019