COMPETITION AND LEADER-FOLLOWER INTERACTIONS: PANEL ESTIMATES ON INDONESIAN BANKING

Authors

Peter Abdullah, Bank Indonesia - Indonesia
Pakasa Bary, Bank Indonesia - Indonesia
Rio Khasananda, Bank Indonesia - Indonesia
Rahmat Eldhie Sya’banni, Bank Indonesia - Indonesia

Document Type

Article

Abstract

This paper discusses banking competition and leader-follower relationship. Banking competition is investigated using some specification from Monti-Klein model that allows leader-follower (i.e. Stackleberg) relationship, the possibility of Cournot competition and other form of competition. We use monthly observations across 119 banks listed in Indonesia using the standard panel fixed effect methodology to absorb time-invariant unobserved heterogeneity and dynamic panel data to minimize the risks of endogeneity. The estimation suggests the leader-follower relationship among banks exist both on loan and deposit markets. The results are mostly consistent across different groups and on full sample estimates, although are quite different in magnitudes. While leader-follower relationship is dominantly occur in credit market, there are some evidence of simultaneous appearance of both leader-follower and Cournot interactions on the deposit market

Recommended Citation

Abdullah, Peter; Bary, Pakasa; Khasananda, Rio; and Sya’banni, Rahmat Eldhie (2016) "COMPETITION AND LEADER-FOLLOWER INTERACTIONS: PANEL ESTIMATES ON INDONESIAN BANKING," Bulletin of Monetary Economics and Banking: Vol. 19: No. 1, Article 5.
DOI: https://doi.org/10.21098/bemp.v19i1.598
Available at: https://bulletin.bmeb-bi.org/bmeb/vol19/iss1/5

First Page

21

Last Page

38

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Bank Indonesia