English, Article, Journal or magazine article edition: Do Public Banks have a Competitive Advantage? Astrid Matthey

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Bookmark: http://trove.nla.gov.au/version/1060
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Do Public Banks have a Competitive Advantage?
Author
  • Astrid Matthey
Physical Description
  • preprint
Notes
  • Private banks often blame state guarantees to distort competition by giving public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic development, private banks may be able to separate ï¬rms by self selection, enter the market, and obtain proï¬ts in equilibrium despite their cost disadvantage. The public bank's competitive advantage may be offset, independently of what its true objective function is. Even perfect competition between private banks does not lead to zero proï¬ts.
  • RePEc:jrp:jrpwrp:2007-100
  • Private banks often blame state guarantees to distort competition by giv- ing public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic develop- ment, private banks may be able to separate firms by self selection, enter the market, and obtain profits in equilibrium despite their cost disadvantage. The public bank's competitive advantage may be offset, independently of what its true objective function is. Even perfect competition between private banks does not lead to zero profits.
  • public banks, state guarantee, self-selection
  • RePEc:hum:wpaper:sfb649dp2008-010
Language
  • English
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