THE STATE OF COMPETITION OF THE TURKISH BANKING INDUSTRY: AN APPLICATION OF THE PANZAR-ROSSE MODEL

Abstract

This paper examines the competitive structures of the Turkish banking industry over the period 1998-2008 and investigates the factors that can explain differences in the degree of competitiveness. The Panzar-Rosse method is used to test for the competitive nature of the industry which also gives the measure of competition the H-statistic is related to a number of industry controls and prevailing banking structures. Our results indicate that the banking industry in Turkey is in an equilibrium state further they are in long run equilibrium. We also found that the banks in Turkey are operating as a whole under conditions of monopolistic competition. However the banks were able to achieve high records of profitability in monopolistically competitive markets.