The Role of the Number of Banks on Debt Dynamics: Evidence from Eurozone Countries

Christos Karpetis, Stefanos Papadamou, Erotokritos Varelas
  • Review of Economics, January 2017, De Gruyter
  • DOI: 10.1515/roe-2017-0001

The Role of the Number of Banks on Debt Dynamics: Evidence from Eurozone Countries

What is it about?

This paper addresses the issue of impacts of the banking market structure on debt dynamics. Using a simple theoretical and empirical model, we provide evidence for a positive link between number of banks and growth rate of debt .In case of Portugal, Italy, Greece, Spain (PIGS countries) the effects are more pronounced.

Why is it important?

The more the number of banks in a market the more the debt growth. This can be based on the fact that it is easier for governemtns to find candidate debt holders.

Perspectives

STEFANOS PAPADAMOU
University of Thessaly

The bank regulation should pay attention on incentives for banks on holding debt. A banking crisis can easily transformed to a debt crisis and the opposite as recent Greek debt crisis shown.

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http://dx.doi.org/10.1515/roe-2017-0001

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