IDEAS home Printed from
   My bibliography  Save this paper

The Duration of Bank Retail Interest Rates




We use bank retail interest rates as price examples in a study of the determinants of price durations. The extraordinary richness of the data allows us to address some major open issues from the price rigidity literature, such as the functional form of the hazard of changing a price, the effect of firm and market characteristics on the duration of prices, and asymmetry in the speed of adjustments to positive and negative cost shocks. We find that the probability of a bank changing its retail rate initially (that is, in roughly the first six months of a spell) increases with time. The most important determinants of the duration of retail interest rates are the cumulated change in the money market interest rates and the policy rate since the last retail rate change. Among bank and market characteristics, the size of the bank, its market share in a given local market, and its geographical scope significantly modify retail rate durations. Retail rates adjust asymmetrically to positive and negative wholesale interest rate changes; the asymmetry of the adjustment is reinforced in part by the bank’s market share. This suggests that monopolistic distortions play a vital role in explaining asymmetric price adjustments.

Suggested Citation

  • Ben R. Craig & Valeriya Dinger, 2011. "The Duration of Bank Retail Interest Rates," Working Papers 88, Institute of Empirical Economic Research, Osnabrueck University.
  • Handle: RePEc:iee:wpaper:wp0088

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. Susmel, Raul & Engle, Robert F., 1994. "Hourly volatility spillovers between international equity markets," Journal of International Money and Finance, Elsevier, vol. 13(1), pages 3-25, February.
    3. Wang, Ping & Liu, Aying & Wang, Peijie, 2004. "Return and risk interactions in Chinese stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(4), pages 367-383, October.
    4. Andrew Worthington & Helen Higgs, 2004. "Transmission of equity returns and volatility in Asian developed and emerging markets: a multivariate GARCH analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(1), pages 71-80.
    5. Phylaktis, Kate, 1999. "Capital market integration in the Pacific Basin region: an impulse response analysis," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 267-287, February.
    6. Zhou, Xiangyi & Zhang, Weijin & Zhang, Jie, 2012. "Volatility spillovers between the Chinese and world equity markets," Pacific-Basin Finance Journal, Elsevier, vol. 20(2), pages 247-270.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    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 (U.S.).
    2. repec:eee:jbfina:v:87:y:2018:i:c:p:164-186 is not listed on IDEAS

    More about this item


    price stickiness; interest rate pass-through; duration analysis; hazard rate;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iee:wpaper:wp0088. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karin Wessler-Rensmann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.