Market Concentration and the Likelihood of Financial Crises
CER-ETH – Center of Economic Research at ETH Zurich Working Paper No. 10/138
26 Pages Posted: 2 Oct 2010
Date Written: September 1, 2010
Abstract
According to theory, market concentration affects the likelihood of a financial crisis in different ways. The “concentration-stability” and the “concentration-fragility” hypotheses suggest opposing effects operating through specific channels. Using data of 160 countries for the period 1970-2007, this paper empirically tests these indirect effects of financial market structure. We set up a simultaneous system in order to jointly estimate financial stability and the relevant channel variables as endogenous variables. Our findings provide support for the assumption of channel effects in general and both the concentration-stability and the concentration-fragility hypothesis in particular. The effects are found to vary between high and low income countries.
Keywords: Market Concentration, Financial Crisis, Systemic Crisis
JEL Classification: G01, G21, E32
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Regulation and Supervision of Banks Around the World: A New Database
By James R. Barth, Gerard Caprio, ...
-
Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation
-
Deposit Insurance and Financial Development
By Robert Cull, Lemma W. Senbet, ...
-
Deposit Insurance Around the Globe: Where Does it Work?
By Asli Demirgüç-kunt and Edward J. Kane
-
Deposit Insurance Around the Globe: Where Does it Work?
By Edward J. Kane and Asli Demirgüç-kunt
-
Market Discipline and Financial Safety Net Design
By Asli Demirgüç-kunt and Harry Huizinga
-
Deposit Insurance Around the World: A Comprehensive Database
By Asli Demirgüç-kunt, Baybars Karacaovali, ...
-
Deposit Insurance in Developing Countries
By Samuel Talley and Ignacio Mas