Template-Type: ReDIF-Paper 1.0
Author-Name: József Molnár
Author-X-Name-First: József
Author-X-Name-Last: Molnár
Author-Email: jomol72@yahoo.com
Author-Workplace-Name: Bank of Finland
Author-Name: Márton Nagy
Author-X-Name-First: Márton
Author-X-Name-Last: Nagy
Author-Email: nagymar@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Csilla Horváth
Author-X-Name-First: Csilla
Author-X-Name-Last: Horváth
Author-Email: c.horvath@fm.ru.nl
Author-Workplace-Name: Radboud University Nijmegen, The Netherlands

Title: A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary

Abstract: In this paper we analyze the degree of competition in the Hungarian household credit and deposit markets. We estimate discrete-choice, multinomial logit deposit service and loan demand functions for each bank and calculate the corresponding price elasticities. Two models of the banking industry are considered: a static, differentiated product Nash-Bertrand oligopoly (as non-collusive benchmark) and a cartel. With estimated marginal costs and observed interest rates we calculate the price-cost margins and compare these to the theoretically implied ones. We find that in our sample period the competition in the Hungarian banking sector is low, i.e. price-cost margins are high.

Length: 44 pages
Creation-Date: 2007
File-URL: http://www.mnb.hu/letoltes/wp2007-1.pdf
File-Format: Application/pdf

Number: 2007/1
Classification-JEL: G21, L11, L13.
Keywords: Demand, discrete choice, product differentiation, banking, market power.
Handle: RePEc:mnb:wpaper:2007/1