Competition and financial stability

Franklin Allen, Douglas Gale

    Research output: Contribution to journalArticle

    Abstract

    Competition policy in the banking sector is complicated by the necessity of maintaining financial stability. Greater competition may be good for (static) efficiency, but bad for financial stability. From the point of view of welfare economics, the relevant question is: what are the efficient levels of competition and financial stability? We use a variety of models to address this question and find that different models provide different answers. The relationship between competition and stability is complex: sometimes competition increases stability. In addition, in a second-best world, concentration may be socially preferable to perfect competition and perfect stability may be socially undesirable.

    Original languageEnglish (US)
    Pages (from-to)453-480
    Number of pages28
    JournalJournal of Money, Credit and Banking
    Volume36
    Issue number3 II
    StatePublished - Jun 2004

    Fingerprint

    Financial stability
    Competition policy
    Perfect competition
    Welfare economics
    Banking sector

    Keywords

    • Banking concentration
    • Crises
    • Dynamic
    • Schumpeterian competition
    • Spatial

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

    Cite this

    Allen, F., & Gale, D. (2004). Competition and financial stability. Journal of Money, Credit and Banking, 36(3 II), 453-480.

    Competition and financial stability. / Allen, Franklin; Gale, Douglas.

    In: Journal of Money, Credit and Banking, Vol. 36, No. 3 II, 06.2004, p. 453-480.

    Research output: Contribution to journalArticle

    Allen, F & Gale, D 2004, 'Competition and financial stability', Journal of Money, Credit and Banking, vol. 36, no. 3 II, pp. 453-480.
    Allen, Franklin ; Gale, Douglas. / Competition and financial stability. In: Journal of Money, Credit and Banking. 2004 ; Vol. 36, No. 3 II. pp. 453-480.
    @article{525bee97b00e4921958b630598143821,
    title = "Competition and financial stability",
    abstract = "Competition policy in the banking sector is complicated by the necessity of maintaining financial stability. Greater competition may be good for (static) efficiency, but bad for financial stability. From the point of view of welfare economics, the relevant question is: what are the efficient levels of competition and financial stability? We use a variety of models to address this question and find that different models provide different answers. The relationship between competition and stability is complex: sometimes competition increases stability. In addition, in a second-best world, concentration may be socially preferable to perfect competition and perfect stability may be socially undesirable.",
    keywords = "Banking concentration, Crises, Dynamic, Schumpeterian competition, Spatial",
    author = "Franklin Allen and Douglas Gale",
    year = "2004",
    month = "6",
    language = "English (US)",
    volume = "36",
    pages = "453--480",
    journal = "Journal of Money, Credit and Banking",
    issn = "0022-2879",
    publisher = "Wiley-Blackwell",
    number = "3 II",

    }

    TY - JOUR

    T1 - Competition and financial stability

    AU - Allen, Franklin

    AU - Gale, Douglas

    PY - 2004/6

    Y1 - 2004/6

    N2 - Competition policy in the banking sector is complicated by the necessity of maintaining financial stability. Greater competition may be good for (static) efficiency, but bad for financial stability. From the point of view of welfare economics, the relevant question is: what are the efficient levels of competition and financial stability? We use a variety of models to address this question and find that different models provide different answers. The relationship between competition and stability is complex: sometimes competition increases stability. In addition, in a second-best world, concentration may be socially preferable to perfect competition and perfect stability may be socially undesirable.

    AB - Competition policy in the banking sector is complicated by the necessity of maintaining financial stability. Greater competition may be good for (static) efficiency, but bad for financial stability. From the point of view of welfare economics, the relevant question is: what are the efficient levels of competition and financial stability? We use a variety of models to address this question and find that different models provide different answers. The relationship between competition and stability is complex: sometimes competition increases stability. In addition, in a second-best world, concentration may be socially preferable to perfect competition and perfect stability may be socially undesirable.

    KW - Banking concentration

    KW - Crises

    KW - Dynamic

    KW - Schumpeterian competition

    KW - Spatial

    UR - http://www.scopus.com/inward/record.url?scp=3142718443&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=3142718443&partnerID=8YFLogxK

    M3 - Article

    VL - 36

    SP - 453

    EP - 480

    JO - Journal of Money, Credit and Banking

    JF - Journal of Money, Credit and Banking

    SN - 0022-2879

    IS - 3 II

    ER -