The impact of interbank and public debt markets on the competition for bank deposits

Carlos Pérez Montes ()
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Carlos Pérez Montes: Banco de España

No 1319, Working Papers from Banco de España

Abstract: The growth in the interest rates paid on Spanish public debt since 2008 and the impairment of the interbank market have generated concerns about their effects on competition for bank deposits in Spain. I combine a nested logit model of bank deposit supply with a structural model of competition to measure the impact of the reference interest rates on public debt and interbank markets on the returns on deposits and funding policy of Spanish banks in the period 2003-2010. The interbank rate is found to be more closely correlated with the return on deposits than the interest rate on public debt, but the connection between interbank rates and deposit returns is significantly weaker in the crisis period 2008-2010. Counterfactual analysis shows a significant effect of the interbank rate and investment opportunities in public debt on deposit rates and bank profits, and that observed deposit rates are on average 115bp above collusive levels

Keywords: Bank Competition; Interbank Rates; Public Debt; Nested Logit; Counterfactual Analysis (search for similar items in EconPapers)
JEL-codes: D43 G21 L1 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ban and nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1319

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