Deposit Rate Asymmetry and Edgeworth Cycles after Hong Kong’s Interest Rate Deregulation

Michael K. Fung

A chapter in Banking and Finance Issues in Emerging Markets, 2018, vol. 25, pp 105-121 from Emerald Group Publishing Limited

Abstract: A full Edgeworth cycle of deposit rate is divided into two phases: an “overcutting cycle” in which the banks battle for deposits, and a “relenting cycle” in which the banks cease battling and instead choose to restore a temporarily low deposit rate. Such strategies have two testable implications on overall market movements. First, deposit rate decreases are more likely to be initiated when the deposit rate is near the upper bound of a cycle. Second, deposit rate decreases are more sensitive than increases to market interest rate changes. This chapter empirically confirms this pattern and shows strong evidence for the presence of Edgeworth cycles in deposit rates after Hong Kong’s interest rate deregulation.

Keywords: Deposit rate; deregulation; Edgeworth cycle; Hong Kong banks; asymmetry; interest rate rules; E43; G21; L43 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... 1-038620180000025006
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620180000025006

DOI: 10.1108/S1571-038620180000025006

Access Statistics for this chapter

More chapters in International Symposia in Economic Theory and Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().