Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Monday, July 9, 2012

Diverse Degrees of Competition within the EMU and their Implications for Monetary Policy

Posted by D. Daniel Sokol

Patrick Bramer (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg), Horst Gischer (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg), Toni Richter (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) and Mirko Weiss (German Savings Banks Association) discuss Diverse Degrees of Competition within the EMU and their Implications for Monetary Policy.

ABSTRACT: Our paper calls attention to the heterogeneous levels of competition in EMU banking systems. We enhanced the ECB MFI interest rate statistics by calculating a lending rate average weighted by loan volumes for each EMU member country. Employing a modified Lerner Index, our unique data set enables us to calculate banks' price setting power in the national lending business alone, instead of measuring market power for banks' total business. For 12 countries, we ultimately show that market power in the exclusive segment of lending is greater than market power in total banking business. In an OLS regression model, we investigate to what extent loan rate variations can be explained by changing degrees of market power during the period 2003-2009. Significant cross-country differences can be observed. We find that changes in the national degree of competition considerably affect funding conditions in the individual countries and ! therefore hinder a homogeneous transmission of ECB monetary policy.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/07/diverse-degrees-of-competition-within-the-emu-and-their-implications-for-monetary-policy-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0168ec049e6f970c

Listed below are links to weblogs that reference Diverse Degrees of Competition within the EMU and their Implications for Monetary Policy :

Comments

Post a comment