A test of the law of one price in retail banking

Alfredo Martin-Oliver, Vicente Salas-Fumás () and Jesús Saurina ()
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Vicente Salas-Fumás: Banco de España

No 530, Working Papers from Banco de España

Abstract: This paper investigates the level and determinants of retail banking interest rate differences among Spanish banks in the period 1989 2003. We find that interest rates of twenty five different bank loan and deposit products adjust rather rapidly to their long term values in response to external shocks, as the relative version of the Law of One Price predicts, but the evidence runs contrary to the absolute version of the Law. Different credit risk across banks and loan products is an important source of interest rate dispersion in the short and long run that puts limits to banking integration.

Keywords: price dispersion; mark up convergence (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-10
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Citations: View citations in EconPapers (4)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/05/Fic/dt0530e.pdf First version, October 2005 (application/pdf)

Related works:
Journal Article: A Test of the Law of One Price in Retail Banking (2007)
Journal Article: A Test of the Law of One Price in Retail Banking (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0530

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