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Some Tests of Competition in the Australian Housing Loan Market

Author

Listed:
  • Jerome Fahrer

    (Reserve Bank of Australia)

  • Thomas Rohling

    (Reserve Bank of Australia)

Abstract

In this paper we investigate the degree of competition in the market for housing loans by examining a new data set, the asset composition of individual banks. We construct a Herfindahl index of concentration in this market, and estimate a model of conjectural variations to examine the reactions of each bank to changes in the value of loans made by other banks. Certain forms of competition are nested within this framework. Our findings lead us to decisively reject the hypotheses of perfect competition and perfect collusion. We are unable to reject the hypothesis that this market can be characterised as a Cournot oligopoly.

Suggested Citation

  • Jerome Fahrer & Thomas Rohling, 1992. "Some Tests of Competition in the Australian Housing Loan Market," RBA Research Discussion Papers rdp9202, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9202
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    References listed on IDEAS

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    Cited by:

    1. Philip Lowe, 1992. "The Impact of Financial Intermediaries on Resource Allocation and Economic Growth," RBA Research Discussion Papers rdp9213, Reserve Bank of Australia.
    2. Tom Valentine, 1992. "Bank Interest Rate Margins," Working Paper Series 22, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Philip Lowe & Thomas Rohling, 1992. "Loan Rate Stickiness: Theory and Evidence," RBA Research Discussion Papers rdp9206, Reserve Bank of Australia.

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