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Estimating a Theoretical Model of State Banking Competition Using a Dynamic Panel: The Brazilian Case

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  • Rocha, Bruno de Paula
  • Sanches, Fábio Adriano Miessi
  • Silva, José Carlos Domingos da

Abstract

In this paper we set up a model of regional banking competition based on Bresnahan (1982), Lau (1982) and Nakane’s (2002) works. The structural model is estimated using data from eight Brazilian states and a dynamic panel – see Arellano and Bond (1991). The results shows that on average the level of competition in the Brazilian banking system is high, even tough the null of perfect competition can be rejected at the usual significance levels. This finding is similar to that presented by Nakane (2002). We also show that the Brazilian loans market were competitive in the years of 2000 and 2001, while in 1999, 2002 and 2003 the hypothesis of perfect competition and perfect collusion can be rejected. On the whole, this result also prevails at the state level: Rio Grande do Sul, São Paulo, Rio de Janeiro, Pernambuco and Minas Gerais have high degree of competition. In Ceará, the null hypothesis of perfect competition cannot be rejected. Notwithstanding, we should point out that Paraná and Bahia have negative and significant coefficients, what can be due to some temporary disequilibrium in this markets (Shaffer, 1993).

Suggested Citation

  • Rocha, Bruno de Paula & Sanches, Fábio Adriano Miessi & Silva, José Carlos Domingos da, 2009. "Estimating a Theoretical Model of State Banking Competition Using a Dynamic Panel: The Brazilian Case," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 63(1), April.
    • Handle: RePEc:fgv:epgrbe:v:63:y:2009:i:1:a:923
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    1. Arellano, Manuel, 1989. "A note on the Anderson-Hsiao estimator for panel data," Economics Letters, Elsevier, vol. 31(4), pages 337-341, December.
    2. Ms. Agnes A Belaisch, 2003. "Do Brazilian Banks Compete?," IMF Working Papers 2003/113, International Monetary Fund.
    3. Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
    4. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    1. Bruno De Paula Rocha & Márcio Issao Nakane, 2011. "Entries, Exits And The Resourceallocation: An Analysis Of The Banking Intermediation In Brazil," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 092, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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