ERF 27th Annual Conference
Banking Market Power and Its Determinants: New Insights from MENA Countries
No.
ERF27_35
Publisher
ERF
Date
May, 2021
Topic
L1. Market Structure, Firm Strategy, and Market Performance
C2. Single Equation Models
G2. Financial Institutions and Services
This paper evaluates the degree and determinants of banks’ market power in 13 MENA countries for the years 2000 to 2018, with a special focus on customers’ switching costs and banks’ cost efficiency. We find that MENA banks enjoy a substantial degree of market power on the loan market, while their customers have to face remarkable costs in case of switching to other banks. Banking market power increases with the level of switching costs and is higher when credit institutions are more cost efficient, focus on the traditional intermediation activity, are smaller in size, and operate in countries where stock markets are less developed, banking markets are more concentrated, the inflation rate is lower, and GDP growth is poor. All our evidence is robust to alternative specifications and estimation techniques.
Research Fellows
Mohamed El Arbi Chaffai
Professor of Econometrics, University of Sfax
Authors
Paolo Coccorese
Professor of Economics, University of Salerno