When They Go Low, We Go High? Measuring Bank Market Power in a Low-for-Long Environment
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
We examine trends in bank competition since the early 2000s. The Lerner index—arguably the most commonly used measure—shows evidence of a marked increase in market power in advanced economies, especially after the global financial crisis. But other frequently used indicators of banking sector competition seem much more muted. We show that the significant drop in policy rates that occurred in the aftermath of the crisis could explain the seeming disconnect. Adjusting the Lerner index for the impact of policy rates reveals that market power has been fairly constant in advanced economies—consistent with the other signals and similar to the pattern observed in emerging markets.
Series:
Working Paper No. 2021/149
Frequency:
regular
English
Publication Date:
May 27, 2021
ISBN/ISSN:
9781513573526/1018-5941
Stock No:
WPIEA2021149
Pages:
26
Please address any questions about this title to publications@imf.org