Article metrics

  • citations in SCindeks: [2]
  • citations in CrossRef:0
  • citations in Google Scholar:[=>]
  • visits in previous 30 days:9
  • full-text downloads in 30 days:6
article: 3 from 4  
Back back to result list
2015, vol. 43, iss. 3, pp. 7-26
article language: English
document type: Original Scientific Paper
published on: 14/12/2015
doi: 10.5937/industrija43-7648
Testing for competition in Serbian banking industry: The Panzar-Rosse approach
aSerbian Academy of Sciences and Arts - SASA, Belgrade
bNational Bank of Serbia, Belgrade
cUniversity of Belgrade, Faculty of Economy



The level of competitiveness in Serbian banking industry is tested using the Panzar-Rosse model on bank level data in period from 2004 to 2012. The panel estimation results imply monopolistic competition in the entire banking sector. However when the methodology is applied to the subset of the large banks, which comprise more than 65% of total banking sector assets, we find that they exhibit monopoly or strong oligopoly behaviour with perfect collusion. This implies that the prices of the banking products are suboptimal in terms of general welfare.


Panzar-Rosse test; competition; banking industry


Allen, F., Gale, D. (2004) Competition and Financial Stability. Journal of Money, Credit, and Banking, 36(3b): 453-480
Alli, N., Neave, E.H.. (1989) Competition and contestability in Canada s financial system: Empirical results. Canadian Journal of Economics, 22(3), str. 576-594
Avdasheva, S., Shastitko, A., Kuznetsov, B. (2007) Competition and Industrial Organisation in Transition Markets: What Can We Derive from Empirical Studies?. Post-Communist Economies, 19(1): 17-33
Beck, T., Levine, R., Loayza, N. (2000) Financial intermediation and growth: Causality and causes. Journal of Monetary Economics, 46, 31-47
Berger, A.N., Hannan, T.H. (1998) The Efficiency Cost of Market Power in the Banking Industry: A Test of the 'Quiet Life” and Related Hypotheses. Review of Economics and Statistics, 80(3): 454-465
Berger, A.N., Klapper, L.F., Turk-Ariss, R. (2008) Bank Competition and Financial Stability. Journal of Financial Services Research, 35(2): 99-118
Bikker, J., Haaf, K. (2002) Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking and Finance, 26 (11), str. 2191-2214
Bikker, J.A., Spierdijk, L. (2008) How banking competition changed over time. Working Papers, Utrecht School of Economics, 08-04
Bikker, J.A., Shaffer, S., Spierdijk, L. (2012) Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium. Review of Economics and Statistics, 94(4): 1025-1044
Botrić, V., Slijepčević, S. (2008) Economic growth in South-eastern Europe: the role of the banking sector. Post-Communist Economies, 20(2): 253-262
Bresnahan, T.F. (1989) Chapter 17 Empirical studies of industries with market power. Handbook of Industrial Organization, : 1011-1057
Bruna, K. (2008) Monetary policy stabilisation, changes in the banking system and interest rate pass-through: the Czech Republic 1999–2006. Post-Communist Economies, 20(4): 413-429
Claessens, S., Luc, L. (2004) What Drives Bank Competition? Some International Evidence. Journal of money credit and banking, 36(3b): 563
Coccorese, P. (2009) Market power in local banking monopolies. Journal of Banking & Finance, 33(7): 1196-1210
Collender, R.N., Shaffer, S. (2003) Local bank office ownership, deposit control, market structure, and economic growth. Journal of Banking & Finance, 27(1): 27-57
de Bandt, O., Davis, P.E. (2000) Competition, contestability and market structure in European banking sectors on the eve of EMU. Journal of Banking & Finance, 24(6): 1045
de Gutiérrez, R.L. (2007) Testing for competition in the Spanish banking industry: The Panzar-Rosse approach revisited. Banco de Espana, Working Paper 0726
de Jonghe, O., Vennet, R.V. (2008) Competition versus efficiency: What drives franchise values in European banking?. Journal of Banking & Finance, 32(9): 1820-1835
Delis, M.D. (2010) Competitive conditions in the Central and Eastern European banking systems. Omega, 38(5): 268-274
Gelos, R.G., Roldos, J. (2004) Consolidation and market structure in emerging market banking systems. Emerging Markets Review, vol. 5, str. 39-59
Iwata, G. (1974) Measurement of Conjectural Variations in Oligopoly. Econometrica, 42(5): 947
Jayaratne, J., Strahan, P.E. (1996) The finance-growth nexus: Evidence from bank Branch deregulation. Quarterly Journal of Economics, 111, 639-670
Jukka, V. (1995) Testing for competition in banking: Behavioral evidence from Finland. Bank of Finland Studies, Working Paper E:1
Konopielko, L. (1999) Foreign Banks' Entry into Central and East European Markets: Motives and Activities. Post-Communist Economies, 11(4): 463-485
Ljumović, I., Pavlović, V., Cvijanović, J.M. (2014) Two aspects of concentration in Serbian banking sector. Industrija, vol. 42, br. 3, str. 61-77
Macit, F. (2012) Recent evidence on concentration and competition in Turkish banking sector. Theoretical and Applied Economics, 8(8); 19
Mattews, K., Murinde, V., Zhao, T. (2007) Competitive conditions among the major British Banks. Journal of Banking and Finance, 31, str. 2025-2042
Maudos, J., de Guevara, J.F. (2007) The cost of market power in banking: Social welfare loss vs. cost inefficiency. Journal of Banking & Finance, 31(7): 2103-2125
Miljković, M., Filipović, S., Tanasković, S. (2013) Market concentration in the banking sector: Evidence from Serbia. Industrija, vol. 41, br. 2, str. 7-25
Molyneux, P., John, T., Lloyd-Williams, M.D. (1996) Competition and Market Contestability in Japanese Commercial Banking. Journal of Economics and Business, 48: 33-45
Panzar, J.C., James, R.N. (1987) Testing for monopoly equilibrium. Journal of Industrial Economics, 25, str. 443-456
Schaeck, K., Cihak, M., Wolfe, S. (2009) Are Competitive Banking Systems More Stable?. Journal of Money, Credit and Banking, 41(4): 711-734
Shaffer, S. (1999) The competitive impact of disclosure requirements in the credit card industry. Journal of Regulatory Economics, 183-198; 15
Shaffer, S. (2002) Conduct in a banking monopoly. Review of Industrial Organization, 20(3): 221-238
Shaffer, S., DiSalvo, J. (1994) Conduct in a banking duopoly. Journal of Banking & Finance, 18(6): 1063-1082
Shaffer, S. (1982) A non structural test for competition in financial market in bank structure and competition. in: The Federal reserve bank conference proceedings, Chicago, 225-243
Shaffer, S. (1993) A test of competition in Canadian banking. Journal of Money, Credit, and Banking, 25, str. 49-61
Shaffer, S. (2004) Patterns of competition in banking. Journal of Economics and Business, 56(4): 287-313
Smith, R.T. (1998) Banking competition and macroeconomic performance. Journal of Money, Credit, and Banking, 30 (4), str. 793-815
van Leuvensteijn, M., Bikker, J.A., van Rixtel, A.A.R.J.M., Sørensen, C.K. (2011) A new approach to measuring competition in the loan markets of the euro area. Applied Economics, 43(23): 3155-3167
Weill, L. (2013) Bank competition in the EU: How has it evolved?. Journal of International Financial Markets, Institutions and Money, 26: 100-112
Yildirim, S.H., Philippatos, G.C. (2007) Competition and contestability in Central and Eastern European banking markets. Managerial Finance, 33(3): 195- 209