ESTIMATION OF THE RELATIONSHIP BETWEEN COMPETITION AND CONCENTRATION IN THE CZECH BANKING SECTOR

This paper examines the relationship between competition and concentration in the Czech banking industry within the period 2001-2011. The level of competition and concentration was estimated in the Czech banking sector. The degree of competition was assessed applying the Bresnahan model and for measuring the degree of concentration the concentration ratio and the Herfindahl-Hirschman index was employed. The relationship between competition and concentration using the Johansen cointegration test was examined. In the paper the cointegration analysis found the negative relationship between competition and concentration in the Czech credit market as well as in the deposit market. This finding confirms results that competition increased and concentration decreased during the analyzed period. Thus, the decrease of the concentration will contribute to competitive conditions in the credit market and market of clients' deposits.