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Do Public Banks Compete with Private Banks? Evidence from Concentrated Local Markets in Brazil

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  • CHRISTIANO A. COELHO
  • JOÃO M.P. DE MELLO
  • LEONARDO REZENDE

Abstract

We measure the competitive effect of public banks in concentrated local markets in Brazil using branch location patterns. We employ variation in market size, number, and identity of competitors to determine how the conduct of private banks is affected by the entry of a public bank. We find that the market size needed to sustain a private bank branch is 35% larger if a private competitor is present and is not significantly affected by the presence of a public bank. These results suggest that the presence of a public bank does not affect conduct of private banks.

Suggested Citation

  • Christiano A. Coelho & João M.P. De Mello & Leonardo Rezende, 2013. "Do Public Banks Compete with Private Banks? Evidence from Concentrated Local Markets in Brazil," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(8), pages 1581-1615, December.
    • Handle: RePEc:wly:jmoncb:v:45:y:2013:i:8:p:1581-1615
    DOI: 10.1111/jmcb.12063
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    Cited by:

    1. Julia Fonseca & Adrien Matray, 2022. "Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil," Working Papers 308, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Garber, Gabriel & Mian, Atif & Ponticelli, Jacopo & Sufi, Amir, 2024. "Consumption smoothing or consumption binging? The effects of government-led consumer credit expansion in Brazil," Journal of Financial Economics, Elsevier, vol. 156(C).
    3. Fonseca, Julia & Matray, Adrien, 2024. "Financial inclusion, economic development, and inequality: Evidence from Brazil," Journal of Financial Economics, Elsevier, vol. 156(C).
    4. Capeleti, Paulo & Garcia, Marcio & Miessi Sanches, Fabio, 2022. "Countercyclical credit policies and banking concentration: Evidence from Brazil," Journal of Banking & Finance, Elsevier, vol. 143(C).
    5. Da Mata, Daniel & Resende, Guilherme, 2020. "Changing the climate for banking: The economic effects of credit in a climate-vulnerable area," Journal of Development Economics, Elsevier, vol. 146(C).
    6. Emilios Galariotis & Iordanis Kalaitzoglou & Jacek Niklewski & Constantin Zopounidis, 2021. "Optimal level of state ownership in banks: prevention measure versus emergency action—evidence from the new millennia," Annals of Operations Research, Springer, vol. 304(1), pages 165-197, September.
    7. Fang, Francis Haoyu & Vlaicu, Razvan, 2024. "Local Banking Supply and Private Firm Activity: Evidence from Branch Closures," IDB Publications (Working Papers) 13645, Inter-American Development Bank.

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