Competitive deposit rates and bank service charges

Juha Tarkka

No 26/1989, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: This paper presents a partial equilibrium model of the determination of deposit rates of interest and bank service charges in a competitive banking industry. It is shown that uncertainty regarding the future use of transactions services can cause a positive. interest rate margin on deposits, and below-cost pricing of transactions services. This contrasts with existing literature which has explained the existence of "implicit interest" as a consequence of interest rate ceilings or non-neutral taxation.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp1989_026

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