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Working paper

Stability of Distribution of Relative Sizes of Banks as an Argument for the Use of the Representative Agent Concept.

Malakhov D., Pilnik N., Pospelov I. G.
We propose a new theoretical model of the large-scale banking system of an open economy. It is shown that the distribution of relative sizes of individual banks is stable over time and does not depend on the volume of deposits. Our findings provide an additional argument in favor of use of the representative agent concept in banking sector modeling. Empirical testing shows that by using generalized versions of Pareto and Normal distribution, the distributions of relative sizes can be approximated with high accuracy and, moreover, they are stable over time. In addition, banks move within this distribution, with the latter being stable over time.