Publication:
Navigating the Competition-Stability Nexus in Financial Services: A Dynamic Extension of the Tinbergen Rule

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dc.contributor.authorCalice, Pietro
dc.date.accessioned2025-05-28T15:19:51Z
dc.date.available2025-05-28T15:19:51Z
dc.date.issued2025-05-28
dc.description.abstractThis paper extends the classic Tinbergen rule within the context of financial regulation, explicitly accounting for the inverted U-shaped relationship between market competition and financial stability. Conventional policy frameworks, premised on independent relationships between policy targets and instruments, inadequately address the complex interactions inherent in the competition-stability nexus. The proposed framework addresses this gap by incorporating four critical dimensions overlooked in traditional applications of the Tinbergen rule: (i) nonlinear interactions among policy objectives, (ii) conflicts arising at extremes of competition, (iii) a hierarchical prioritization of financial stability objectives, and (iv) inherent structural constraints of prudential instruments. The paper introduces a dynamic optimization approach that calibrates policy instruments according to the financial system’s position along the competition-stability curve. Additionally, it provides a comprehensive taxonomy of regulatory instruments, categorizing them based on their primary targets and secondary (cross-) effects, thereby facilitating state-dependent policy formulation. The paper also outlines practical institutional arrangements and coordination mechanisms that are crucial for effective implementation. Overall, the approach may help to equip regulators with strategies for dynamically managing competition and stability, ultimately enhancing the efficiency and robustness of financial systems.en
dc.identifierhttp://documents.worldbank.org/curated/en/099322105192533877
dc.identifier.urihttps://hdl.handle.net/10986/43248
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 11124
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectTINBERGEN RULE
dc.subjectFINANCIAL REGULATION
dc.subjectFINANCIAL STABILITY
dc.subjectMARKET COMPETITION
dc.subjectNON-LINEAR POLICY RELATIONSHIPS
dc.subjectREGULATORY COORDINATION
dc.titleNavigating the Competition-Stability Nexus in Financial Servicesen
dc.title.subtitleA Dynamic Extension of the Tinbergen Ruleen
dc.typeWorking Paper
dspace.entity.typePublication
okr.date.disclosure2025-05-28
okr.date.lastmodified2025-05-28T13:05:02Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099322105192533877
okr.guid099322105192533877
okr.identifier.docmidIDU-ba700cc8-92ba-44ac-bbe9-4b900cd30375
okr.identifier.doi10.1596/1813-9450-11124
okr.identifier.externaldocumentum40014215
okr.identifier.internaldocumentum40014215
okr.identifier.reportWPS11124
okr.import.id7480
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttps://documents.worldbank.org/curated/en/099322105192533877/pdf/IDU-ba700cc8-92ba-44ac-bbe9-4b900cd30375.pdfen
okr.region.geographicalWorld
okr.topicFinance and Financial Sector Development::Banks & Banking Reform
okr.topicGovernance::Governance and the Financial Sector
okr.topicFinance and Financial Sector Development::Financial Regulation & Supervision
okr.unitEFI-ECA-FCI-Finance-1 (EECF1)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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