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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/27019
Title: Competition and Financial Stability
Authors: Allen, Franklin
Gale, Douglas
Issue Date: 6-Sep-2003
Series/Report no.: S-FI-03-06
Abstract: Competition policy in the banking sector is complicated by the necessity of maintaining financial stability. Greater competition may be good for (static) efficiency, but bad for financial stability. From the point of view of welfare economics, the relevant question is: What are the efficient levels of competition and financial stability? We use a variety of models to address this question and find that different models provide different answers. The relationship between competition and stability is complex: sometimes competition increases stability. In addition, in a second-best world, concentration may be socially preferable to perfect competition and perfect stability may be socially undesirable.
URI: http://hdl.handle.net/2451/27019
Appears in Collections:Financial Institutions

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