Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251297 
Year of Publication: 
2021
Series/Report no.: 
Working Papers No. 2021-26
Publisher: 
Banco de México, Ciudad de México
Abstract: 
This paper examines the link between bank competition measures and risk indicators using quarterly interbank exposures data for all banks in Mexico during 2008Q1-2019Q1. The classical literature focuses on disentangling the link between competition and individual bank solvency risk. In this paper, we take one step forward in analyzing the relationship between competition and systemic risk. We use counterfactual bank-level contagion risk indicators as a proxy of systemic risk to assess their relationship with traditional competition measures. Our main finding indicates a negative relationship between the bank-level Lerner index and systemic risk. This means that an increase in competition is associated with an increase in systemic risk. Additionally, we find that the implementation of regulatory reform during the period studied does not affect this relationship.
Subjects: 
Bank competition
systemic risk
financial contagion
financial stability
network models
JEL: 
C23
D40
G21
G28
L14
L16
L22
Document Type: 
Working Paper
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