Market structure and the nature of price rigidity: evidence from the market for consumer deposits
AbstractPanel data on consumer bank deposit interest rates reveal asymmetric impacts of market concentration on the dynamic adjustment of prices to shocks. Banks in concentrated markets are slower to raise interest rates on deposits in response to rising market interest rates but are faster to reduce them in response to declining market interest rates. Thus, banks with market power skim off surplus on movements in both directions. Since deposit interest rates are inversely related to the price charged by banks for deposits, the results suggest that downward price rigidity and upward price flexibility are a consequence of market concentration. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 52.
Date of creation: 1989
Date of revision:
Other versions of this item:
- Neumark, David & Sharpe, Steven A, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 657-80, May.
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