Competitive Conditions of the Tunisian Banking Industry: An Application of the Panzar–Rosse Model

Abstract

This study employs the Panzar-Rosse H-statistic to assess the competitive conditions of the Tunisian banking industry over the period 1999 to 2003. The results show that the banking market is in long-run equilibrium and the Panzar-Rosse H-statistic indicates that the Tunisian banking market is operating under conditions of monopoly. It seems therefore that the liberalization process and the reforms implemented since 1987 to the banking sector could not compensate, for the period under study, the existence of market power in this sector. Competitive Conditions of the Tunisian Banking Industry533 2006. Moreover, for all North African countries included in the sample (Tunisia, Algeria and Morocco), the tests of hypothesis failed to reject a monopolistic environment in the banking industry (Turk-Ariss, 2009).By estimating the effect of prices of production factors on net income, one could conclude that movements of liberalization, deregulation and modernization of the Tunisian banking system could not compensate, for the period under study, the existence of market power. This market power may be related to: 1. A low presence of foreign banks on the Tunisian banking industry. 2. The importance of economic barriers and other important sources of market power.

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