Did financial crisis alter the level of competition in the EMU banks?

Abstract

The goal of this article is to empirically assess the level of competition in the European Monetary Union (EMU) banking sector. The empirical findings provide sufficient evidence in favour of a monopolistic competition regime. The industry structure of the banking sector seems to have been left unaltered after the adoption of the euro currency and the recent financial crisis with the estimated values of the H-statistic range between zero and unity.

Keywords:

• banking
• monopolistic competition
• panel data
• financial crisis

JEL Classification:

• G21
• C23
• L10

Notes

¹ For an extensive review, see Andrieş and Căpraru (2013). 

² The H-statistic is smaller than 0 for a neo-classical monopolist or collusive oligopolist, it ranges between 0 and 1 for a monopolistic competitor and is equal to unity for a competitive price-taking firm. However, negative values of H-statistic may indicate competitive behaviour (Bikker et al., 2012).