Retail Bank Deposit Pricing: An Intertemporal Asset Pricing Approach
Fundamentally, spreads between market and deposit interest rates increase when interest rates rise and decline when rates fall. Recent empirical studies have found this phenomenon to be related to market concentration. Static equilibrium models are poorly equipped to explain this behavior. In this paper, the author applies an intertemporal asset pricing model incorporating bank deposits as a form of money in order to analyze the pricing behavior of a banking sector exercising market power. His results extend the theoretical literature on deposit pricing and provide some insights into the behavior of interest rate spreads through time. Copyright 1995 by Ohio State University Press.
Volume (Year): 27 (1995)
Issue (Month): 1 (February)
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