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Bank deposit rate clustering: theory and empirical evidence

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  • Charles M. Kahn
  • George Pennacchi
  • Ben Sopranzetti

Abstract

An examination of banks' optimal deposit-rate-setting behavior when some customers have limited recall, showing that when banks exploit this phenomenon, deposit rates will tend to be set at round fractions and will be relatively \"sticky\" at these levels.

Suggested Citation

  • Charles M. Kahn & George Pennacchi & Ben Sopranzetti, 1996. "Bank deposit rate clustering: theory and empirical evidence," Working Papers (Old Series) 9604, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:9604
    DOI: 10.26509/frbc-wp-199604
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    References listed on IDEAS

    as
    1. Christie, William G & Schultz, Paul H, 1994. "Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-1840, December.
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    Keywords

    Bank deposits; Interest; Prices;
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