Bank mergers and deposit interest rate rigidity

Valeriya Dinger

No 1131, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: In this paper I revisit the debate on the impact of bank and market characteristics on the rigidity of retail bank interest rates. Whereas existing research in this area has been exclusively concerned with static measures of bank and market structure, I adopt a dynamic approach which explores the rigidity effects of the changes of bank and market structure generated by bank mergers. I find that bank mergers significantly affect the frequency of changes to deposit rates. In particular, the probability of adjusting deposit rates in response to shocks in money market rates significantly drops after mergers that involve large target banks and after mergers that generate a substantial geographical expansion of bank operations. These effects, however, materialize only after a \"transition\" period characterized by very frequent changes of the deposit rates.

Keywords: Bank mergers; Bank deposits; Interest rates (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-cba, nep-com and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1131

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