MARKET POWER OF INDONESIAN BANKING
Abstract
This study aimed to estimate the degree of market power exercised by commercial banks in the credit market in Indonesia. The model used to answer this study’s objective was the Bresnahan-Lau oligopoly model that uses structural equations to estimate the degree of market power. This model uses a very different approach than Structure-Conduct-Performance (SCP) paradigm commonly used in market power studies. Without using actual cost data and accounting profit, the Bresnahan-Lau model was able to estimate directly the degree of market power from the structural equations. The main result of this study showed that the degree of market power exercised by commercial banks in the credit market is relatively low; in other words, the degree of competition in the credit market in Indonesia is quite high.
Downloads
References
Amidu, Mohammed, 2006. The Link between Monetary Policy and Banks Lending Behavior: The Ghanaian Case. Banks and Bank Systems.Vol.1, Issue 4.
Bikker, J., A., 2003. Testing for Imperfect Competition on EU Deposit and Loan Markets with Bresnahan’s Market power Model. De Netherlandsche Bank Research Series, Amsterdam.
Bikker, J. A. and K. Haaf, 2002.Competition, Concentration and Their Relationship: An Empirical Analysis of the Banking Industry. Journal of Banking and Finance 26, 2191-2214.
Bresnahan, T. F. , 1982. The oligopoly Solution Concept is Identified. Economics Letters 10, 87-92.
_____________. , 1989. Empirical Studies in Industries with Market power, In: Schmalensee, R. Willig, R. D. (Eds.), Handbook of Industrial Economics, vol. 2. North-Holland, Amsterdam.
Church, J. , And R. Ware, 2000. Industrial Organization: A Strategic Approach. Boston, Massachusetts, Irwin McGraw-Hill.
Cole, David C. and Betty F. Slade, 1996. Building a Modern Financial System: The Indonesian Experience, Cambridge University Press.
Lau, L. J., 1982. On Identifying the Degree of Competitiveness from Industry Price and Output Data. Economics Letters 10, 93-99.
Layard P. R. G and Walters, A. A., 1978. Microeconomic Theory. Mac-Graw Hill.
Lubis, AndiF. , 1997. Structure and Market power: Analysis of Panel on Processing Industry from 1985 to 1994. S1 FEUI Thesis (unpublished). Depok.
Norman, G and La Manna, M (eds), 1992. The New Industrial Economics, Aldershot, Edward Elgar.
Panzar, J. and Rosse, J., 1987. Testing for ‘Monopoly’ Equilibrium, Journal of Industrial Economics 35, 443-456.
Steen, F. and Salvanes, K. G., 1999. Testing for Market power Using a Dynamic oligopoly models. International Journal of Industrial Organization 17, 147-177.
Toolsema, L. A., 2002. Competition in the Dutch Consumer Credit Market. Journal of Banking and Finance 26, 2215-2229.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
