Posted by D. Daniel Sokol
Stephen Haber, Stanford University – Hoover Institution and Political Science and Aldo Musacchio, Harvard Business School – Business discuss These are the Good Old Days: Foreign Entry and the Mexican Banking System
ABSTRACT: In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico’s largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks. The result has been a dramatic shift in the ownership structure of Mexico’s banks. For instance, while in 1991 only one percent of bank assets in Mexico were foreign owned, today they control 74 percent of assets. In no other country in the world has the penetration of foreign banks been as rapid or as far-reaching as in Mexico. In this work we examine some of the important implications of foreign bank entry for social welfare in Mexico. Did liberalization lead to an increase (or decrease) in the supply of credit? Did liberalization lead to an increase (or decrease) in the cost of credit? Did liberalization lead to an increase (or decrease) in the stability of the banking system?In order to answer these questions, we must first ask, “increase (or decrease), measured on what basis?” There are, in fact, two distinct conceptual frameworks through which one can assess the impact of foreign bank entry. One is concerned with measuring the short-run impacts of foreign entry on credit abundance, pricing, and observable stability using reduced form regressions. The other is an institutional economics conception of how to measure performance. It is focused on understanding whether foreign entry gave rise to difficult-to-reverse changes in the political economy of bank regulation, which will affect competition and stability in the long term, outside the period that may be observed empirically. We employ both conceptions in this paper.
Featured News
Federal Judge Signals Revisions Likely in DOJ Case Targeting Live Nation Monopoly
Jan 22, 2025 by
CPI
American Airlines and JetBlue Agree to $2 Million Legal Fee Settlement with U.S. States
Jan 22, 2025 by
CPI
Federal Judge Dismisses Class Action Alleging Inflated Yacht Commission Fees
Jan 22, 2025 by
CPI
Doug Gurr Appointed Interim Chairman of UK’s Competition Authority
Jan 22, 2025 by
CPI
LinkedIn Faces Lawsuit Over Alleged Misuse of Customer Data for AI Training
Jan 22, 2025 by
Amanda Adams
Antitrust Mix by CPI
Antitrust Chronicle® – Pharmacy Benefit Managers
Jan 20, 2025 by
CPI
Untangling the PBM Mess
Jan 20, 2025 by
Kent Bernard
Using Data, Not Anecdotes, to Analyze Criticisms of Pharmacy Benefit Managers
Jan 20, 2025 by
Dennis Carlton
Vertical Integration and PBMs: What, Me Worry?
Jan 20, 2025 by
Lawton Robert Burns & Bradley Fluegel
The Economics of Benefit Management in Prescription-Drug Markets
Jan 20, 2025 by
Casey B. Mulligan