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An Analysis of Degree of Competition in Banking Sector of Pakistan through a Direct Measure of Market Contestability
Mahmood ul Hasan Khan
(State Bank of Pakistan)
This paper measures the degree of competition in the banking sector of Pakistan by using structural approach developed by Panzar and Rosse (PR) in context of market contestability. A reduced form revenue equation is estimated by using panel data of 26 banks. The sample period is from 1997 to 2007. Various tests on PR-H Statistics suggest that banking sector of Pakistan, as a whole, is consistent with a monopolistically competitive market structure. Failure to reject the null of long-run equilibrium of the banking sector, a key assumption of PR-H Statistic, lends more credence to the finding of underlying degree of competition
Mahmood ul Hasan Khan, 2009. "An Analysis of Degree of Competition in Banking Sector of Pakistan through a Direct Measure of Market Contestability," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 5, pages 35-52.
Handle: RePEc:sbp:journl:41
File URL: http://www.sbp.org.pk/research/bulletin/2009/Vol5No.2/MahmoodHasanKhan.pdf
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concentration; competition; market contestability; banking system;
D4 - Microeconomics - - Market Structure, Pricing, and Design
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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