<abstract xmlns="http://www.w3.org/1999/xhtml">
<p>The aim of this paper was to analyse the relationship between market concentration and market interest rate. Taking into thought the relationship between the level of concentration within a market and the level of competition, it can be deduced that an increment in concentration results in a decrease in competition. In order to test the above mentioned relationship, the authors used a panel dataset covering the period 2010Q1-2019Q4. The set includes quarterly data of all banks that operated in the Republic of Serbia. First of all, a correlation analysis was applied to determine whether there is a quantitative agreement between interest rates and concentration measures, and also a regression analysis i.e., econometric evaluation of panel regression models. In order to test the hypothesis, a total of 12 regression equations were applied. Results indicate that that the concentration indicators have a statistically significant and negative impact on the overall active interest rate in only two regression models, which is inadequate to support the hypothesis that there exists a systematic influence of concentration in the banking industry on interest rates. As a conclusion, the regression analysis imposes that the variations of the total loan interest rate can be explained to the greatest extent by the systematic and robust influences of the key policy rate of the NBS and the interannual inflation rate for the given quarter, as well as by the robust tendency of a linear decline over time.</p>
</abstract>

The aim of this paper was to analyse the relationship between market concentration and market interest rate. Taking into thought the relationship between the level of concentration within a market and the level of competition, it can be deduced that an increment in concentration results in a decrease in competition. In order to test the above mentioned relationship, the authors used a panel dataset covering the period 2010Q1-2019Q4. The set includes quarterly data of all banks that operated in the Republic of Serbia. First of all, a correlation analysis was applied to determine whether there is a quantitative agreement between interest rates and concentration measures, and also a regression analysis i.e., econometric evaluation of panel regression models. In order to test the hypothesis, a total of 12 regression equations were applied. Results indicate that that the concentration indicators have a statistically significant and negative impact on the overall active interest rate in only two regression models, which is inadequate to support the hypothesis that there exists a systematic influence of concentration in the banking industry on interest rates. As a conclusion, the regression analysis imposes that the variations of the total loan interest rate can be explained to the greatest extent by the systematic and robust influences of the key policy rate of the NBS and the interannual inflation rate for the given quarter, as well as by the robust tendency of a linear decline over time.

The Relationship Between Bank Concentration and Interest Rates

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"The Relationship Between Bank Concentration and Interest Rates"}

The aim of this paper was to analyse the relationship between market concentration and market interest rate. Taking into thought the relationship between the...

The Relationship Between Bank Concentration and Interest Rates

Published Online: Sep 05, 2023

Page range: 23 - 39

Received: May 16, 2023

Accepted: Jun 15, 2023

DOI: https://doi.org/10.2478/jcbtp-2023-0023

Keywords
market concentration, loan, interest rate

© 2023 Tijana Kaličanin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

The Relationship Between Bank Concentration and Interest Rates

Published Online: Sep 05, 2023

Page range: 23 - 39

Received: May 16, 2023

Accepted: Jun 15, 2023

DOI: https://doi.org/10.2478/jcbtp-2023-0023

Keywordsmarket concentration, loan, interest rate

© 2023 Tijana Kaličanin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
market concentration, loan, interest rate