Sticky deposit rates

John Driscoll and Ruth A. Judson
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Ruth A. Judson: https://www.federalreserve.gov/econres/ruth-a-judson.htm

No 2013-80, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We examine the dynamics of eleven different deposit rates for a panel of over 2,500 branches of about 900 depository institutions observed weekly over ten years. We replicate previous work showing that rates are downwards-flexible and upwards-sticky, and show that a simple menu cost model can generate this behavior. The degree of asymmetric rigidity varies substantially by deposit type, bank size, and across branches of the same bank. In the absence of such stickiness, depositors would have received as much as $100 billion more in interest per year during periods when market rates were rising. These results also suggest that deposit rates are likely to lag increases in policy and market rates in future tightening cycles.

Date: 2013
New Economics Papers: this item is included in nep-hme and nep-mac
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Citations: View citations in EconPapers (26)

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