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Linking the Cs of Financial Stability: Crises, Competition, and Concentration

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  • Bagsic, Cristeta

Abstract

This paper is a replication and extension of Schaeck, Cihak, and Wolfe (2009). In contrast to results for a heterogeneous set of countries in Schaeck, Cihak, and Wolfe (2009), findings herein indicate that there is a chance that competition engenders systemic banking crisis for ASEAN EMEs, and that although concentration may not increase the probability of a banking crisis, at decreasing levels of competition, increasing concentration could damage financial stability. When controls for regulation and macroprudential tools are introduced, the opposite effects of competition and concentration on financial stability becomes more apparent.

Suggested Citation

  • Bagsic, Cristeta, 2021. "Linking the Cs of Financial Stability: Crises, Competition, and Concentration," MPRA Paper 112397, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112397
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    File URL: https://mpra.ub.uni-muenchen.de/112397/1/MPRA_paper_112397.pdf
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    References listed on IDEAS

    as
    1. Aurélien Leroy & Yannick Lucotte, 2017. "Is there a competition-stability trade-off in European banking?," Post-Print hal-03529909, HAL.
    2. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-583, June.
    3. Thorsten Beck, 2007. "Bank Concentration and Fragility. Impact and Mechanics," NBER Chapters, in: The Risks of Financial Institutions, pages 196-231, National Bureau of Economic Research, Inc.
    4. IJtsma, Pieter & Spierdijk, Laura & Shaffer, Sherrill, 2017. "The concentration–stability controversy in banking: New evidence from the EU-25," Journal of Financial Stability, Elsevier, vol. 33(C), pages 273-284.
    5. Leroy, Aurélien & Lucotte, Yannick, 2017. "Is there a competition-stability trade-off in European banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 199-215.
    6. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial stability; concentration; competition; banking crises;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G1 - Financial Economics - - General Financial Markets

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