Competition and Efficiency in the Mexican Banking Industry: by Sara G. Castellanos, Gustavo A. Del Ángel, Jesús G.

By Sara G. Castellanos, Gustavo A. Del Ángel, Jesús G. Garza-García

This important new ebook contributes to the knowledge of pageant coverage within the Mexican banking method and explains how degrees of pageant relate to banks' potency. It contrasts ideas of financial concept with empirical proof to distill optimum coverage judgements. The authors learn the banking quarter in Mexico, a constructing state with a regulated and sound banking procedure and an with robust participation from worldwide systemic banks. despite the fact that, the Mexican banking process maintains to have low monetary deepening within the financial system. concurrently, adjustments skilled by way of the Mexican economy in contemporary many years have thoroughly remodeled its structure, constitution of possession and keep watch over, and its aggressive stipulations, and feature undeniably affected procedure functionality and potency. this gives a typical laboratory within which to respond to the questions of students, economists, and policymakers.

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Additional resources for Competition and Efficiency in the Mexican Banking Industry: Theory and Empirical Evidence

Sample text

Examples of such models are the Bresnahan (1982), Iwata (1974), Lau (1982), Lerner index (1934), and the Panzar and Rosse (1977) models, among others. These models empirically measure the degree of competitive behavior in the market (or contestability) and attempt to quantify the conduct of banks without explicitly using information on the structure of the market (Northcott 1994). This approach follows the efficiency hypothesis, suggesting that competition enhances the performance of the most efficient firms, reflected in the firm’s profitability or market share (Leuvensteijn, Bikker, van Rixtel, and Sorensen 2007).

This initial consolidation was the only one not associated with a crisis. The second consolidation took place toward the beginning of the 1980s after the government had expropriated the banking sector. The third was the result of the Tequila crisis, which erupted toward the end of 1994 and severely affected the Mexican banking system. This last consolidation process took several years; 38 COMPETITION AND EFFICIENCY first, banks in good conditions absorbed institutions that did not survive the crisis.

These models empirically measure the degree of competitive behavior in the market (or contestability) and attempt to quantify the conduct of banks without explicitly using information on the structure of the market (Northcott 1994). This approach follows the efficiency hypothesis, suggesting that competition enhances the performance of the most efficient firms, reflected in the firm’s profitability or market share (Leuvensteijn, Bikker, van Rixtel, and Sorensen 2007). Many of these theory-based models have been extensively used in the empirical literature.

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