COMPETITION AND LEADER-FOLLOWER INTERACTIONS: PANEL ESTIMATES ON INDONESIAN BANKING
Keywords:
banking, monetary policy
Abstract
This paper discusses banking competition and leader-follower relationship. Banking competition is investigated using some specification from Monti-Klein model that allows leader-follower (i.e. Stackleberg) relationship, the possibility of Cournot competition and other form of competition. We use monthly observations across 119 banks listed in Indonesia using the standard panel fixed effect methodology to absorb time-invariant unobserved heterogeneity and dynamic panel data to minimize the risks of endogeneity. The estimation suggests the leader-follower relationship among banks exist both on loan and deposit markets. The results are mostly consistent across different groups and on full sample estimates, although are quite different in magnitudes. While leader-follower relationship is dominantly occur in credit market, there are some evidence of simultaneous appearance of both leader-follower and Cournot interactions on the deposit marketDownloads
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References
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Amidu, Mohammed and Simon Wolfe (2013). The effect of banking market structure on the lending channel: Evidence from emerging markets. Review of Financial Economics, 22:146–157
Angelini, Paolo dan Nicola Cetorelli (2003). The Effects of Regulatory Reform on Competition in the Banking Industry, Journal of Money, Credit and Banking, Vol. 35, No. 5: 663-684
Arellano, M., and S. Bond. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58:277–97
Ariefianto, M.D. (2009). Perilaku Persaingan Industri Perbankan Di Indonesia Pasca Krisis, Analisa Dengan Pendekatan Teori Oligopoli Dan Ekonometrika Panel Data 2002-2008, PhD Dissertation, University of Indonesia
Borio, C. and Fritz, W. (1995). The response of short-term bank lending rates to policy rates: a cross-country perspective, BIS Working Paper No. 27. 5
Claessens, Stijn and Luc Laeven (2004). What Drives Bank Competition? Some International Evidence, Journal of Money, Credit and Banking, 36 (3): 563-583
Cottarelli, C. and Kourelis, A. (1994). Financial structure, bank lending rates and the transmission of monetary policy, IMF Staff Paper, 42: 670–700
Freixas X. and J.-C. Rochet (2008). The microeconomics of banking, Boston: The MIT Press, 2nd edition
Gunji, Hiroshi, Kazuki Miura and Yuan Yuan (2009). Bank Competition and monetary policy, Japan and the World Economy, 21: 105–115
Klein, Michael A. (1971). A Theory of the Banking Firm. Journal of Money, Credit and Banking, 3(2): 205-218
Olivero, María Pía, Yuan Li, and Bang Nam Jeon (2011). Competition in banking and the lending channel: Evidence from bank-level data in Asia and Latin America, Journal of Banking &
Finance 35, 560–571
Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9 (1): 86–136.
Toolsema-Veldman, L. & Schoonbeek, L. (1999). Bank behavior and the interbank rate in an oligopolistic market. Working paper, University of Groningen, SOM research school
Van Leuvensteijn, Michiel (2013). Impact of bank competition on the interest rate passthrough in the Euro area, Applied Economics, 45: 1359–1380
Published
2016-09-30
How to Cite
Abdullah, P., Bary, P., Khasananda, R., & Sya’banni, R. (2016). COMPETITION AND LEADER-FOLLOWER INTERACTIONS: PANEL ESTIMATES ON INDONESIAN BANKING. Buletin Ekonomi Moneter Dan Perbankan, 19(1), 21-38. https://doi.org/10.21098/bemp.v19i1.598
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
