Evolution of market power in financial intermediation services in Argentina: Effects of the persistence of the favorable macroeconomic context?

Working papers | 2008 | N 31

Abstract

The low depth of the Argentine financial system has raised questions about its development potential, even under contexts of relatively favorable macroeconomic expectations. Contributing to the analysis of this key industry, this work develops a methodology to measure the evolution of the market power of the financial intermediation system. The structural model follows the guidelines proposed by the “New Empirical Industrial Organization” (NEIO) and the “discrete choice” literature, with adaptations for the analysis of this particular industry in the local market. Among the results obtained, there is evidence that supports the presence of market power in the financial intermediation industry. However, there are signs of some increase in the degree of competition. The present work contributes to the literature applied to the local market by proposing the development of an alternative approach, which models the production of the industry and the duality of intermediation services.

JEL classification: G21, L11, L13, C8, C33