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Managing the endogeneity problem of the market structure: a study on banking competition

Author

Listed:
  • Tri Mulyaningsih
  • Anne Daly
  • Riyana Miranti

    (Faculty of Economic and Business, Sebelas Maret Surakarta University, Surakarta, Indonesia.
    Faculty of Business, Government and Law, University of Canberra, Australia,
    National Centre for Social and Economic Modelling, University of Canberra, Australia.)

Abstract

Recent literature suggests that the market structure is an endogenous variable that is determined by a firm?s behaviour and the competitive environment of the industry. This study examines the relation between the market structure and the banks? behaviour in Indonesian banking by considering the endogeneity problem of them as variables. The estimations using the Vector-ErrorCorrection approach suggest that the structural approach provides a valid prediction of the relationship between market structure and bank behaviour by recognizing the endogeneity issue between those two variables. The banking industry would be more competitive if the market was less concentrated.

Suggested Citation

  • Tri Mulyaningsih & Anne Daly & Riyana Miranti, 2015. "Managing the endogeneity problem of the market structure: a study on banking competition," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 7(2), pages 135-154, April.
    • Handle: RePEc:uii:journl:v:7:y:2015:i:2:p:135-154
    DOI: http://dx.doi.org/10.20885/ejem.vol7.iss2.art6
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    References listed on IDEAS

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    More about this item

    Keywords

    market structure; endogeneity; banking; industry; VECM;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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