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Bank Competition and The Price of Credit: Evidence Using Mexican Loan Level Data

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  • Cañón, Carlos
  • Cortés, Edgar
  • Guerrero, Rodolfo

Abstract

This paper studies the relationship between competition measures at the bank level and the price of credit for non-financial firms in Mexico during 2009-2016. Two indicators of competition are constructed: the Lerner indicator and the Boone indicator. Evidence is provided that similar loans provided by banks with higher market power (Lerner indicator) are significantly more expensive: 11 percent higher than the mean interest rate. In addition, that price difference is concentrated in loans given out to microenterprises and small firms, and firms located in the central and southern regions of the country.

Suggested Citation

  • Cañón, Carlos & Cortés, Edgar & Guerrero, Rodolfo, 2020. "Bank Competition and The Price of Credit: Evidence Using Mexican Loan Level Data," IDB Publications (Working Papers) 10476, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:10476
    DOI: http://dx.doi.org/10.18235/0002521
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    More about this item

    Keywords

    Banks; Competition; Non-financial firms; Loan interest rate;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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