Interest rate dispersion in deposit and loan markets
AbstractThis paper investigates the existence and determinants of interest rates dispersion in loans and deposits of Spanish banks. A unique feature of the research is that it covers a whole industry (thirty products and two hundred banks) from 1989 to 2003. We find that: i) interest rates dispersion is a persistent phenomena in loans and deposits markets; ii) the differences across products in the observed dispersion can be explained as a function of variables that affect the private net benefits of consumers' investment in information including search costs (frequency and volume of transactions); iii) interest rate dispersion is more sensible to product specific inflation than to changes in the interest rate of the economy; iv) regulation of standards of transparency by the Spanish Central Bank has been effective in reducing interest rate dispersion.
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Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0506.
Length: 36 pages
Date of creation: Mar 2005
Date of revision:
price dispersion; search costs; information differentiation; inflation; transparency regulation;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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