Description: Department Seminar: Rajdeep Sengupta (Federal Reserve Bank of Kansas City)
Location: 368A Heady Hall
Contact Person: Juan Carlos Cordoba
Abstract: Linkages between bank competition and stability are analyzed in a generalized theoretical framework where market integration is the principal driver of increased competition. Risk implications of across-market competition under banking market integration are significantly different from that of within-market competition. While both modes of analyzing competition increase the number of competitor banks, any relation between competition and risk-taking under within-market competition can be shown to reverse with across-market competition under market integration. Robust to different settings, this result suggests that the lack of consensus in the bank competition-financial stability literature is not an anomaly but an inherent feature of the problem.