Banking Competition and Macroeconomic Performance
Year: 1998
Type: article
Abstract: This paper uses an equilibrium model to study the costs, in terms of macroeconomic performance, of imperfect competition in banking. The social welfare effects of increased bank competition are complicated and ambiguous in general, but measuring the consequences of increased bank competition with standard gauges of macroeconomic performance provides a clear conclusion: increased bank competition raises the level of income and reduces the severity of business cycles. The quantitative effect on macroeconomic performance of less competition in banking can be large; for instance, an imperfectly competitive banking system can produce a worse macroeconomic outcome than if the economy had no banks.
DOI: 10.2307/2601129
Author: R. Todd Smith
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2155474107