Abstract
This article examines whether competition in the deposit and loan markets results in a more stable or fragile banking industry. Following the assumption that deposit and loan competitions are not separable, a simple equilibrium model is developed. Then, using the aggregate time-series data of Federal Deposit Insurance Corporation (FDIC)-insured financial institutions, we estimate the generalized VAR model of deposit rate (DR), interest margin between the loan and DRs, and non-performing loan ratio. Our results support the competition–fragility hypothesis.
| Original language | English |
|---|---|
| Pages (from-to) | 6165-6173 |
| Number of pages | 9 |
| Journal | Applied Economics |
| Volume | 50 |
| Issue number | 57 |
| DOIs | |
| Publication status | Published - 2018 Dec 8 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics