Discussion Paper

No. 2013-55 | October 22, 2013
Evolutionary Model of the Bank Size Distribution

Abstract

An evolutionary model of the bank size distribution is presented based on the exchange and expansion of deposit money. In agreement with empirical results the derived size distribution is lognormal with a power law tail. The key idea of the theory is to regard the creation of money as a slow process compared to exchange processes of deposit money. The exchange of deposits causes a preferential growth of banks with a fitness determined by the competitive advantage to attract permanent deposits. They generate the lognormal part of the size distribution. Sufficiently large banks, however, benefit from economies of scale leading to a Pareto tail. The model suggests that the liberalization of the banking system in the last decades is the origin of an increasing skewness of the bank size distribution.

JEL Classification

G21 L11 E11

Cite As

Joachim Kaldasch (2013). Evolutionary Model of the Bank Size Distribution. Economics Discussion Papers, No 2013-55, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2013-55

Assessment



Comments and Questions


Anonymous - Referee Report 1
December 10, 2013 - 12:45

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Joachim Kaldasch - Reply to Referee Report 1
January 29, 2014 - 15:05

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Anonymous - Referee Report 2
December 19, 2013 - 09:06

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Joachim Kaldasch - Reply to Referee Report 2
January 29, 2014 - 15:06

See attached file


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