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Journal of Banking & Finance Vol. 133 2021

Government intervention and bank markups: Lessons from the global financial crisis for the COVID-19 crisis

Brandon Tan1; Deniz Igan2; Maria Soledad Martinez Peria; Nicola Pierri2; Andrea F. Presbitero2

1 Department of Economics, Littauer Center, 1805 Cambridge Street Cambridge, MA 02138, USA · 2 International Monetary Fund

open access

Abstract

The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on markups, we rely on the experience of the Global Financial Crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. Using a multivariate matching method, we find no evidence of an increase in markups. Interventions—especially longer and larger ones—have no significant impact on prices but they increase costs, mostly because of higher loan impairment charges, lowering markups.

DOI
10.1016/j.jbankfin.2021.106320
Volume
133
Pages
106320
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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