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Measuring the Level of Competition in the Loan Market of the Thai Banking Industry Using the Boone Indicator

Author

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  • Rungporn Roengpitya

    (Bank of Thailand)

Abstract

This paper follows the pioneer effort in measuring the competition level in the loan markets among selected countries in the European Union by van Leuvensteijn et al. (2007). In this study, the competition level in the loan market of the Thai banking industry is calculated both in aggregate of time and by year, from 1994-2004. In addition, for comparison purposes, I also re-assess the level of competition in the loan market of the U.S. banks, using the data from the CALL Report during the years 1994-2004, which is different from the original paper that uses the Bankscope data from 1999- 2004. The results indicate that the Thai banking industry is much less competitive when compared to the U.S. banking industry and bears higher marginal costs, which consequently translates to lower efficiency. Finally, it is worth noting that the method of estimating the translog cost function diverges from the EU paper in a sense that the states’ fixed effects are included in this study and that the marginal cost equation is estimated differently due to the use of a different marginal cost equation.

Suggested Citation

  • Rungporn Roengpitya, 2010. "Measuring the Level of Competition in the Loan Market of the Thai Banking Industry Using the Boone Indicator," Working Papers 2010-01, Monetary Policy Group, Bank of Thailand.
    • Handle: RePEc:bth:wpaper:2010-01
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    File URL: http://www.bot.or.th/Thai/EconomicConditions/Publication/DiscussionPaper/dp012010_eng.pdf
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    References listed on IDEAS

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    1. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
    2. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Other publications TiSEM 2efcaf8b-c898-47e9-887a-a, Tilburg University, School of Economics and Management.
    3. Stijn Claessens & Luc Laeven, 2004. "What drives bank competition? Some international evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 563-592.
    4. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Other publications TiSEM 032bda7d-58a6-4c6c-83ac-0, Tilburg University, School of Economics and Management.
    5. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, August.
    6. Boone, Jan, 2000. "Competition," CEPR Discussion Papers 2636, C.E.P.R. Discussion Papers.
    7. Jayaratne, Jith & Strahan, Philip E, 1998. "Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 239-273, April.
    8. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Discussion Paper 2007-32, Tilburg University, Center for Economic Research.
    9. Michiel van Leuvensteijn & Jacob Bikker & Adrian van Rixtel & Christoffer Kok Sørensen, 2011. "A new approach to measuring competition in the loan markets of the euro area," Applied Economics, Taylor & Francis Journals, vol. 43(23), pages 3155-3167.
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    Cited by:

    1. Pariyada Sukcharoensin, 2013. "Time-Varying Market, Interest Rate and Exchange Rate Risks of Thai Commercial Banks," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 25-45.

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