Concentration and Competition in Banking Sector of Pakistan: Empirical Evidence

Mahmood ul Hasan Khan ()
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Mahmood ul Hasan Khan: State Bank of Pakistan

No 28, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: The paper measures the degree of competition in the banking sector of Pakistan by using a long-existing structural approach developed by Panzar and Rosse (PR) in context of market contestability. A reduced from revenue equation is estimated by using panel data consisting of 26 banks from 1997 to 2007. The 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. Length: 18 pages

Keywords: Concentration; competition; market contestability; banking system (search for similar items in EconPapers)
JEL-codes: D4 G21 (search for similar items in EconPapers)
Date: 2009-03
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