Authors: Joaquín Maudos and Juan Fernández

Title: Banking competition and economic growth: cross-country evidence

Source: The European Journal of Finance

Abstract: The aim of this paper is to analyse the effect of banking competition on industry economic growth using both structural measures of competition and measures based on the new empirical industrial organisation perspective. The evidence obtained in the period 1993-2003 for a sample of 53 sectors in 21 countries indicates that financial development promotes economic growth. The results also show that bank monopoly power has an inverted-U-shaped effect on economic growth, suggesting that bank market power has its highest growth effect at intermediate values. The latter result is consistent with the literature on relationship lending, which argues that bank competition can have a negative effect on the availability of finance for companies that are informationally more opaque.


Recommended citation:
Maudos, J. and J. Fernández de Guevara, 2011. "Banking competition and economic growth: cross-country evidence", The European Journal of Finance, 17 (7-8), August-September, pp. 739-764.


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