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The Duration of Bank Retail Interest Rates

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  • Ben R. Craig
  • Valeriya Dinger

Abstract

We examine the rigidity of retail deposit and loan rates by applying duration analysis on uniquely rich data. We find that the retail rate dynamics are state-dependent. An important determinant of the duration of retail interest rates are the dynamics of the wholesale (market and monetary policy) interest rates. We also show that the reaction to positive and negative wholesale interest rate changes is strongly asymmetric. Moreover, retail rate durations are significantly modified by bank and market characteristics, such as the size of the bank, its market share in a given local market, and its geographical scope.

Suggested Citation

  • Ben R. Craig & Valeriya Dinger, 2014. "The Duration of Bank Retail Interest Rates," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(2), pages 191-207, July.
  • Handle: RePEc:taf:ijecbs:v:21:y:2014:i:2:p:191-207
    DOI: 10.1080/13571516.2014.909173
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    File URL: http://hdl.handle.net/10.1080/13571516.2014.909173
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    Cited by:

    1. John C. Driscoll & Ruth Judson, 2013. "Sticky deposit rates," Finance and Economics Discussion Series 2013-80, Board of Governors of the Federal Reserve System (US).
    2. repec:eee:jbfina:v:87:y:2018:i:c:p:164-186 is not listed on IDEAS

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