Economics at your fingertips  

Evidence of customer sophistication behaviour in deposit markets: the case of Qatar

Noura Abu Asab ()

Journal of Economic Studies, 2020, vol. 47, issue 5, 1181-1196

Abstract: Purpose - The paper investigates the interest rate policy transmission mechanism and the role of market structure of the banking industry in Qatar. Design/methodology/approach - Competitiveness indexes are used to measure the degree of market power in the banking industry in Qatar. The momentum threshold autoregressive model is applied over the monthly period from January 2005 to June 2018 to examine the magnitude of intermediation and adjustment to disequilibria in the deposit market. In addition, to model interest rate volatility and overcome the problem of heteroscedastic errors in the error correction standard models, an asymmetric EC-EGARCH-M model is applied. Findings - The findings suggest incomplete pass-through and asymmetric response to monetary shocks. The asymmetric adjustment mechanism is found to be downward rigid which suggests a high degree of customer sophistication and an elastic supply of deposits. The results of the EC-EGARCH-M show that the impact of monetary policy shocks has a significant positive impact on deposit interest rates and that negative monetary shocks trigger more conditional interest rate volatility in the next period than positive monetary shocks for a short maturity rate. Originality/value - The paper is the first to highlight the behaviour of the interest rate pass through channel and measures the degree of competitiveness of the banking industry for the case of a small, rich country. In addition, using recent data, the paper applies different econometric methodologies and overcomes the problem of heteroskedastic errors by modelling the interest rate volatility using the EC-EGARCH-M model.

Keywords: Deposit rate; Information asymmetry; Pass-through; Market power; Qatar; Retail interest rate; Volatility; C32; E40; E43; E44; E58 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

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:

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK

Access Statistics for this article

Journal of Economic Studies is currently edited by Professor Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

Page updated 2022-09-20
Handle: RePEc:eme:jespps:jes-08-2019-0371