Competition and Financial Stability
نویسندگان
چکیده
Competition in the Þnancial sector is more complex than in the rest of the economy. On the one hand, concentration in the banking industry reduces (static) efficiency as it does in any industry. On the other hand, concentration may also affect the stability of the banking industry in ways that have no counterpart in other industries. In this paper we consider a variety of models of competition and stability in the banking sector. We argue that the standard view that there is a trade-off between competition and Þnancial stability often does not hold. For example, with general equilibrium models with incomplete contracts, or Schumpeterian models of innovation, efficiency requires both perfect competition and Þnancial instability.
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