Monetary Policy and Banking Market Structure: Evidence from an Emerging Economy
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This paper analyzes the impact of monetary policy on the structure of the banking market in Colombia, considering the recent period of an active monetary policy, in the context of high inflation rates. Using monthly credit portfolio data between 2017 and 2023, concentration indicators such as the Herfindahl-Hirschman Index (HHI), CRk indices, and the dominance index are estimated, and a VAR model is employed to evaluate the concentration response to a monetary shock. The results show that, although concentration levels remain high, they coincide with reducing the probability of market dominance. Also, monetary policy has a structural effect on market evolution, favoring consolidation in contractionary scenarios. The paper contributes to the debate on the non-neutrality of economic policy in contexts of high financial concentration and puts forward public policy recommendations to strengthen banking competition and financial inclusion.