Market Power Evolution of Financial Intermediation Services in Argentina: Effects of Favorable Macroeconomic Perspectives?

The low depth of the argentinian financial system has motivated doubts about its potentials of development, even under relatively favorable macroeconomic expectations. Contributing to the analysis of this key industry, the current paper develops a methodology to measure the evolution of the financial system’s market power. The structural model follows the guidelines of the “New Empirical Industrial Organization” (NEIO) and the “discrete choice” literature. Additionally, several modifications were incorporated to get a more accurate analysis of the local industry. Among the obtained results, some evidence was found supporting the presence of market power in the financial intermediation industry. Nevertheless, some signs of certain increase in the competition level were found. This paper attempts to provide new elements to applied literature on the local financial market. The proposed framework models the industry production, taking into account the duality of the financial intermediation business.