Market power and bank interest rate adjustments

Raquel Lago-González () and Vicente Salas-Fumás ()
Additional contact information
Raquel Lago-González: Banco de España
Vicente Salas-Fumás: Banco de España

No 539, Working Papers from Banco de España

Abstract: Evidence is presented on the long and short run relationship between the money market interest rate and loan and deposit interest rates charged by individual Spanish banks between 1988 and 2003. The results indicate that such relationships have been determined by a mixture of adjustment costs and market power of banks, which creates interest rate rigidity and asymmetries in the speed at which increases and decreases in the money market interest rate are translated into banking interest rates. We also find that the price adjustment speed first decreases and later increases with market concentration, which is consistent with predictions from models that assume quantity adjustment costs.

Keywords: interest rates rigidity; quantity adjustment costs; market power; market concentration (search for similar items in EconPapers)
JEL-codes: D40 L11 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2005-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/05/Fic/dt0539e.pdf First version, November 2005 (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:bde:wpaper:0539

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().