Deregulation, Liberalization, and Consolidation of the Mexican Banking System: Effects on Competition

Joaquín Maudos
Liliana Solís
Publication Type: 
Papers
Journal Name: 
Journal of International Money and Finance
Journal Volume: 
30
Journal Number: 
2
Pages: 
337-353
Publication Year: 
2011

This paper analyzes the evolution of competition in the Mexican banking system in the period 1993–2005, a period of deregulation, liberalization and consolidation of the sector. For this purpose we use two indicators of competition from the theory of industrial organization (the Lerner index and the Panzar and Rosse’s H-statistic). The empirical evidence does not permit us to reject the existence of monopolistic competition. The Lerner index shows a decrease in competitive rivalry in the deposit market and an increase in the loan market, a cross subsidization strategy being observed. The results obtained call into question the effectiveness of the measures implemented hitherto, aimed at increasing the competition of the Mexican banking system.

JEL Codes: 
G21, L10
Region: 
Latin America/Caribbean
Country: 
Mexico
Topic: 
Financial Institutions
Topic: 
Industrial Organization
Topic: 
Economic Modeling