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Bank deposit interest rate pass-through and geographical segmentation in Japanese banking markets

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  • Uchino, Taisuke

Abstract

This paper estimates the pass-through from market interest rates to deposit interest rates to investigate whether the Japanese bank deposit markets are geographically segmented. A unique feature of this paper is the use of monthly deposit interest rates posted by 106 regional banks from March 1999 to March 2010. Following the theoretical results from a simple banking activity model with Cournot competition, I estimate the long run pass-through of each regional bank utilizing the panel cointegration method. The empirical results of this paper show a significant negative correlation between regional market concentration and pass-through, which implies the existence of geographical market segmentation.

Suggested Citation

  • Uchino, Taisuke, 2014. "Bank deposit interest rate pass-through and geographical segmentation in Japanese banking markets," Japan and the World Economy, Elsevier, vol. 30(C), pages 37-51.
    • Handle: RePEc:eee:japwor:v:30:y:2014:i:c:p:37-51
    DOI: 10.1016/j.japwor.2014.02.003
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    Cited by:

    1. Henry Penikas, 2023. "Smoothing the Key Rate Pass-Through: What to Keep in Mind When Interpreting Econometric Estimates," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 3-34, September.
    2. Jiri Gregor & Jan Janku & Martin Melecky, 2022. "From Central Counter to Local Living: Pass-Through of Monetary Policy to Mortgage Lending Rates in Districts," Working Papers 2022/9, Czech National Bank.
    3. Machava, Agostinho, 2017. "The Macroeconomic Determinants of the Pass-Through from the Market Interest Rate to the Bank Lending Rate in Mozambique," Umeå Economic Studies 954, Umeå University, Department of Economics.
    4. Fukuyama, Hirofumi & Matousek, Roman, 2018. "Nerlovian revenue inefficiency in a bank production context: Evidence from Shinkin banks," European Journal of Operational Research, Elsevier, vol. 271(1), pages 317-330.
    5. Tsuruta, Daisuke, 2023. "Distant lending for regional small businesses using public credit guarantee schemes: Evidence from Japan," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 60-76.

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    More about this item

    Keywords

    Interest rate pass-through; Geographical segmentation; Panel cointegration;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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