Oxford Economic Papers

A new measure of firm-level competition: an application to euro area banks

Retrieved on:

torsdag, april 18, 2024

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Abstract

Key Points:

Abstract
This paper extends Boone (2008) by introducing a competition measure at the individual
firm level rather than for an entire market segment.
We apply this extended Boone indicator to individual bank-level competition
in the loan market in the four largest euro area countries and Austria.
Our new measure of firm-level competition enriches and complements
other competition measures and provides a promising starting point for future market
power analyses.
The only measure among non-structural measures that is based on the
concept of competition as a process of rivalry is the Boone (2008) indicator.
We introduce
a new performance measure of competition by extending the Boone indicator to the
individual firm level.
Introduction
The ability to reliably measure competition is valuable to researchers, analysts, and
policymakers, especially antitrust authorities, financial supervisors, and central banks.
One broad
category of indicators often used to measure competition are structural competition
measures, such as static concentration measures, and dynamic measures, e.g., entry and
exit rates.
Out of these measures, the only measure based on the
concept of competition as a process of rivalry is the Boone indicator.
This study introduces a new performance measure of competition by extending the
Boone indicator to the individual firm level.
It thus measures the
increase in profits in percent of one percentage point increase in efficiency, with marginal
costs as measure of efficiency.
We extend the theoretical
underpinning of the measurement of competition for the entire market of Boone (2008) by
a new measure of individual firm-level competition.
A concern of the literature is the gap
between the practical application and the theoretical framework of Boone (2008).
We introduce within the same theoretical
framework a new measure of competition on firm level, the MRP.
Our new
measure significantly augments the antitrust evaluative framework by shedding light on
whether a merger results in a less competitive market.
Our novel indicator focuses on
firms? incentives to enhance their relative efficiency, as manifested in the elasticity
between relative profits and efficiency.
However, an inefficient firm that is foreclosed could be more
competitive than the larger efficient firm that relies on its scale economies.
Our new metric of competition unveils
banks? ability to influence their profitability in the short term by cutting costs relative to
their peers.
The new MRP indicator provides the ability to assess the impact
of individual banks? competitiveness on their interest rate-setting behaviour in loan
markets.
Incorporating this information promises a more refined understanding of the impact and
timing of monetary policy rates changes on the real economy.
Section 3 introduces within the Boone
(2008) theoretical framework our new measure of individual firm-level competition,
including the interpretation of the MRP.
Section 4 provides an application of our new
ECB Working Paper Series No 2925
6

individual firm-level competition measure to the loan market.
The StructureConduct-Performance paradigm (SCP) provides a traditional framework in the field of
industrial organization for analysing competition behaviour in markets.
Concentrated
markets ease the possibilities to collude implicitly or explicitly and therefore concentrated
markets result in higher prices and profits.
For example, a tougher competition
setup may lead to a reallocation of market shares, potentially forcing some firms to exit
the market.
This approach gives firms? strategic behaviour
central stage and focuses on the strategic interaction on prices and quantities, known as
conjectural variation.
Another measure from
this strand of literature is the H-statistic developed by Panzar and Rosse (1987).
The only competition measure from this performance literature where competition is the
outcome from a process of rivalry is the Boone indicator.
A continuous and monotonically increasing relationship exists between
RPD and the level of competition if firms are ranked by decreasing efficiency.
(2013) compare the Boone indicator with the price-cost margin
and conclude that the profit elasticity is a more reliable measure of competition.
The high
elasticity of profits to efficiency unequivocally indicates that the high market shares and
therefore high profits are due to high efficiency.
A firm that quickly passes changes to the input prices is seen as a price
taker with little market power.
Indicators of competition tend to measure different phenomenon and may provide
conflicting messages, as reported for European banking by Carbo et al.
Application 2: Test the ?quiet life? and related market structure hypotheses using the
MRP as competition or market structure measure.
Data
Our application to individual bank-level competition in the euro area loan market uses
balance sheet and income statement data from the Moody?s Analytics BankFocus for the
calendar years 2013-2020.
As such, most publications
on competition in the euro area includes the largest four member states.
Due to these restrictions the database was reduced to an unbalanced panel of up to 1862
banks (depending on the year) from five euro area countries.
Application 1: Measure bank competition using MRP
Looking at the distribution of the MRP for individual banks (Fig.
A similar finding for the four largest euro area countries as a group is
reported in Carbo et al.
Application 2: Test of market structure hypotheses using MRP
Our new measure of individual-bank competition can be used to test market structure
theories.
Euro area banks? market power,
lending channel and stability: the effects of negative policy rates, European Central Bank
Working Paper, 2790 (February).
A
new approach to measuring competition in the loan markets of the euro area, Applied
Economics, 43 (23), 3155?3167.
Impact of bank competition on the interest rate pass-through in the euro area, Applied
Economics, 45 (11), 1359?1380.

How geopolitics is changing trade

Retrieved on:

onsdag, april 3, 2024

Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant.

Key Points:

Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant.
The impact of geopolitical distance on trade is heterogeneous: in particular, geopolitical considerations mostly affect European trade in strategic products.

Consumer participation in the credit market during the COVID-19 pandemic and beyond

Retrieved on:

tisdag, april 2, 2024

Tax, BLS, Face, La Cava, Liquidity, Journal of Economic Perspectives, Special, MRO, Recovery, Next Generation, Child, Interview, Transport, Attanasio, Consumer behaviour, DFR, Research Papers in Economics, Post-Keynesian economics, Gross domestic product, .177 caliber, Great Moderation, European Commission, Vaccine, Employment, Loan, PDF, Hall, House, ECB, Unemployment, Risk, Shock, Education, Rutgers University Press, Quarterly Journal, Policy, Real estate economics, EU Council, Woman, HHS, World Health Organization, Section 4, Clutch (eggs), MIT Press, Omicron, De Nederlandsche Bank, Social science, Federal Reserve Bank, Modigliani, EDS, JEL, Christian Social Union (UK), Female, Section 3, COVID-19, The Journal of Finance, Journal, Classification, News, Journal of Monetary Economics, Oxford Economic Papers, Death, Insurance, Journal of Economics, FRB, FED, Credit, HFCS, Economy, Deficit reduction, Vaccination, Princeton University Press, Literature, CES, Application, University of Oxford, Paper, R.E, Quarterly Journal of Economics, Section 2, European Central Bank, Civil service commission, C23, COVID, Conference, European Council, Central bank, Lifting, HH, Political economy, Consumer confidence index, European Parliament, MIT, RRF, Monetary economics, Household, Perception, Section 5, Bank, Structure, Reproduction, Website, HICP, Aimé Dossche, Working paper, Housing, Cambridge, Massachusetts, Heart, Fabbri, American Economic Review, Partner, Data, Collection, Probability, Government, Real estate

We find that credit demand is highest when

Key Points:

We find that credit demand is highest when
the first lockdown ends and it drops when supportive monetary compensation schemes are implemented.
Credit is more likely to be
accepted under favourable borrowing conditions and after the approval of national recovery plans.
We also find
that demographic, economic factors, perceptions and expectations are associated with the demand for credit and
the credit grant.
First, it adds to a rapidly growing literature on household
borrowing behaviour during the COVID-19 pandemic; see, for example, Ho et al.
We provide evidence that credit applications and credit acceptances display a different pattern over
time.
Credit is more likely to be accepted under favourable borrowing conditions and after the
approval of national recovery plans.
In almost all countries
households are significantly less likely to apply and to get their credit approved than in Germany.
In line with literature, we show that
demographic and economic factors affect the probability for credit applications and credit approval.
In addition,
the paper shows that consumer perceptions and expectations matter when they decide to apply for credit.
Introduction
The participation of households in the credit market receives wide attention in the consumer finance literature
because consumer credit enters the monetary policy transmission mechanism through the so-called ?credit
channel?: changes in credit demand and supply have an effect on consumers' spending and investment, which in
turn affect economic growth.
We use microdata from the ECB?s Consumer Expectations Survey (hereinafter CES), a survey that
measures consumer expectations and behaviour in the euro area.
Its panel dimension allows for an assessment of
how consumer behaviour changes over time and how consumers respond to critical economic shocks.
This way we can gauge how credit applications and credit acceptances change under different, almost
opposite, borrowing conditions.
We also distinguish between the demand for long-term secured loans (mortgages) and for short-term
uncollateralized loans (consumer loans).
ECB Working Paper Series No 2922
3

We use probit models to estimate the probability of the consumer to apply for credit and the credit being granted.
The rate peaks in 2020Q3 which reflects the rebound in the demand for loans when the first lockdown ended.
In almost all countries households are significantly less likely
to apply and to get their credit approved than in Germany.
However,
when it comes to credit acceptance, we observe that the two groups of households are more similar.
Finally, we find some heterogeneity with respect to the type of credit, particularly between secured and unsecured
debt.
The demand for
consumer credit is insignificant for liquid households and decreases significantly for constrained households in
the last two quarters of our timespan.
The first consists of a recently growing literature which
explores consumer behaviour in the credit market during the COVID-19 pandemic, mostly in the United States.
Sandler and Ricks (2020) show that consumers did not use credit card debt for financial liquidity in the early stage
of the COVID-19 pandemic.
(2020) report that credit card applications and new mortgage loans
declined during the first months of the pandemic in regions with more unemployment insurance claims.
Lu and
Van der Klaauw (2021) show that there was a sharp drop in consumer credit demand, especially for credit cards.
(2022) document that there was a substantial decrease in the usage of credit cards and home equity lines
of credit by Canadian consumers.
Our paper is also consonant with studies on the association between financial and demographic factors and
consumers? participation in the credit market as well as on the demand for specific types of credit.
January 2020 ? October 2020 - The two main events are the outbreak of the COVID-19 pandemic and the
consequential lockdowns in the euro area.
4 If the
respondent has applied for more than one type of credit, she is asked to refer to the most recent credit application.
Between 2021Q3 and 2022Q3 the acceptance
rate stays above the average values, mirroring the easing of credit standards for consumer credit and other lending
to households during this period.
Second, we can investigate the presence of nonlinearities in how liquidity and the credit type interact in explaining credit applications.
(2023) ? who show that in the United States the local pandemic severity had a strong
negative effect on credit card spending early in the pandemic, which diminished over time.
First, we select mortgages and consumer credit as the two mostly reported categories for secured and
13

The full estimation results are reported in Table 3.
The right-hand side panel of Figure 6 shows that the demand for consumer credit is insignificant for both liquid
and illiquid households.
It also shows that
subjective perceptions of credit access, financial concerns and expectations on interest rates matter for the demand
for credit.
In Bertola, G., Disney
R., and Grant, C. (eds) The Economics of Consumer Credit, Cambridge MA, MIT Press.
Horvath, A., Kay, B. and Wix, C. (2023) The COVID-19 shock and consumer credit: Evidence from credit card
data.
Magri, S. (2007) Italian households? debt: The participation to the debt market and the size of the loan.

New Study: Disney Generates $40 Billion in Annual Economic Impact in Florida and Over Quarter of a Million Jobs

Retrieved on:

tisdag, november 14, 2023

For every direct job on-site at Disney, an additional 1.7 jobs are supported across Florida.

Key Points:

For every direct job on-site at Disney, an additional 1.7 jobs are supported across Florida.
Disney revenues and off-site visitor spending contributed to $12.1 billion in total labor income in fiscal year 2022.
The study, which was commissioned by Disney, also reflects the economic impact of Disney Signature Experiences in Florida, including Disney Vacation Club and Disney Cruise Line.
If history is any indication, when Disney invests in Florida, its residents and businesses benefit.

Important Silver Demand Drivers to Effectively Double Rate of Growth Over Next Decade

Retrieved on:

onsdag, november 8, 2023

Solar energy, Oxford Economic Papers, Jewellery, Silver, Research, Economics, Growth, City, Statistics, Electronics, Overalls, Forecasting, Palladium, Copper

WASHINGTON, Nov. 08, 2023 (GLOBE NEWSWIRE) -- Three key sectors of global silver demand – industrial, jewelry and silverware – are significant drivers for annual silver consumption and accounted for nearly three-quarters of the world’s demand for silver in 2022.

Key Points:

WASHINGTON, Nov. 08, 2023 (GLOBE NEWSWIRE) -- Three key sectors of global silver demand – industrial, jewelry and silverware – are significant drivers for annual silver consumption and accounted for nearly three-quarters of the world’s demand for silver in 2022.
This stands in contrast to investment demand for silver, which was a sturdy 27 percent of overall silver demand last year.
Their report, “Fabrication Demand Drivers for Silver in the Industrial, Jewelry and Silverware Sectors Through 2033,” was commissioned by the Silver Institute to examine and forecast the growth rates of key sectors of global silver manufacturing demand, and to gain insight into how demand will change over the next decade.
The consultancy found that the combined output of silver industrial, jewelry and silverware fabricators is forecast to increase 42 percent, effectively double the growth rate over the previous decade, 2014-2023.

Nearly Half of BNPL Consumers Prefer Pay-in-4 Over Credit Cards as They Look for More Choice at Checkout

Retrieved on:

onsdag, oktober 25, 2023

Additionally, the report reveals that two in five American consumers use BNPL services, with Afterpay being the most trusted BNPL offering among those who had tried it.

Key Points:

Additionally, the report reveals that two in five American consumers use BNPL services, with Afterpay being the most trusted BNPL offering among those who had tried it.
A majority of the BNPL customers surveyed believe that it helps provide an alternative to paying high-interest credit card debt (70%).
Customers who use Afterpay valued its BNPL services more, over three times higher than other BNPL providers in the survey.
The low cost and convenience of BNPL services over credit cards is especially favored by Afterpay customers.

New Study Reports Incentive Travel Growth, Variations by Industry Sector

Retrieved on:

måndag, oktober 16, 2023

Partnership, Geography, For-Site Foundation, SITE, Travel, Growth, LAS, MOSFET, Society, ITI, Oxford Economic Papers, IRF, Overalls, ROI, Tourism, Renewable energy, Marketing

LAS VEGAS, Oct. 16, 2023 /PRNewswire-PRWeb/ -- The newly released 2023 Incentive Travel Index (ITI) reports that, overall, the incentive travel industry is strong. Growth is projected through 2025 for both number of people participating in incentive trips as well as per-person spend. That said, tangible financial ROI and concerns around cost are indexing higher than previous studies, highlighting a underlying caution that stems from an uncertain geo-political, economic, and environmental backdrop. While industry-wide trends emerged, the study reflects variation by geography as well as by industry sector.

Key Points:

The newly released 2023 Incentive Travel Index (ITI) reports that, overall, the incentive travel industry is strong.
LAS VEGAS, Oct. 16, 2023 /PRNewswire-PRWeb/ -- The newly released 2023 Incentive Travel Index (ITI) reports that, overall, the incentive travel industry is strong.
The Incentive Travel Index is joint initiative of the Incentive Research Foundation (IRF) and the Foundation of the Society for Incentive Travel Excellence (SITE Foundation) and is undertaken in partnership with Oxford Economics.
For additional key findings from the 2023 Incentive Travel Index study as well as reports from previous years, visit https://www.incentiveindex.com/ .

Air Partner Business Travel Charter Solutions: Beyond Business as Usual

Retrieved on:

måndag, oktober 2, 2023

View the full release here: https://www.businesswire.com/news/home/20231002755482/en/

Key Points:

View the full release here: https://www.businesswire.com/news/home/20231002755482/en/
“While private charter is not the solution for every individual trip or group movement, given the right circumstances, the benefits of private aviation for business travel justify the cost,” said Erica Merrill, Director of Business Development at Air Partner , whose extensive background includes experience managing corporate travel accounts across multiple industries.
“Too many companies try to cut costs on transportation for business travel, with potentially detrimental results, including decreased productivity and missed opportunities.
More recently, according to a study by Oxford Economics, each dollar invested in business travel produces $12.50 in revenue and $3.80 in profits.
“Air Partner’s charter services are geared to work for companies by providing transportation solutions that enhance business travel for employees on the move, rather than make it a grind.”

Fujitsu global survey highlights four keys to successful sustainability transformation, providing insights from 1,800 business leaders

Retrieved on:

torsdag, juni 29, 2023

Organization, Digital technology, Trust, Climate change, Environment, Oxford Economic Papers, CO2, Automation, Retail, Management, Fujitsu

In collaboration with Oxford Economics, this seventh survey explores the current status of sustainability transformation, including how digital transformation contributes to the achievement of sustainability goals.

Key Points:

In collaboration with Oxford Economics, this seventh survey explores the current status of sustainability transformation, including how digital transformation contributes to the achievement of sustainability goals.
The findings of this survey will help Fujitsu to address the challenges of realizing a sustainable world with customers through Fujitsu Uvance.
In collaboration with Oxford Economics, Fujitsu conducted this survey to clarify the state and the success factors for sustainability transformation.
The survey revealed that only 8% of organizations are true sustainability leaders, developing organizational capacity, implementing strategies, and delivering outcomes toward the realization of sustainability transformation.

Turning Stone Resort Casino Announces Details of $370 Million Evolution; Largest Expansion in Resort History

Retrieved on:

måndag, juli 24, 2023

Oneida Indian Nation Homelands, NY, July 24, 2023 /PRNewswire-PRWeb/ -- The Oneida Indian Nation today announced details of its $370 million capital investment in the largest evolution of Turning Stone Resort Casino in two decades. More than an expansion, this reinvestment will be a complete evolution of the region's premier resort destination with a new conference center, outdoor event spaces, hotel, and more to fully reimagine Turning Stone for generations to come. The Nation has partnered with world-renowned architecture and design firm Gensler, and will break ground on this massive two-year project early next year. Along with its $370 million reinvestment, the Turning Stone evolution will generate a $616 million one-time economic impact, create 3,600 one-time jobs and generate $22.1 million in state and local tax revenues.

Key Points:

The Oneida Indian Nation today announced details of its $370 million investment in the evolution of Turning Stone Resort Casino, the largest in the resort's history.
Oneida Indian Nation Homelands, NY, July 24, 2023 /PRNewswire-PRWeb/ -- The Oneida Indian Nation today announced details of its $370 million capital investment in the largest evolution of Turning Stone Resort Casino in two decades.
Along with its $370 million reinvestment, the Turning Stone evolution will generate a $616 million one-time economic impact, create 3,600 one-time jobs and generate $22.1 million in state and local tax revenues.
"The Turning Stone Evolution is much more than just an expansion," said Ray Halbritter, Oneida Indian Nation Representative and Oneida Nation Enterprises CEO.