Banking competition as the basis of investment demand

Abstract

The article is devoted to the analysis of the situation when one bank in the market has excess market power. This concentration of assets negatively affects the state of competition in the Russian banking sector. This is evidenced by the downward inflexibility of interest rates, which is observed in all segments of household lending. High interest rates, in turn, hinder an increase in investment and consumer demand from Russian firms and households. This trend towards inflexibility of nominal and real interest rates in the Russian economy is confirmed by empirical data in recent years. In addition, the article compares the dynamics of interest rates in Russia and the United States in comparable periods of time. Based on these data, the authors come to the conclusion about a high degree of monopolization of the Russian banking market.