Financial Liberalization, Bank Market Structure, and Financial Deepening: An Interest Margin Analysis

Abdourahmane Sarr

No 2000/038, IMF Working Papers from International Monetary Fund

Abstract: The paper shows that commercial banks’ ability to lower deposit interest rates (market power) can increase deposit mobilization. Interest expenses saved can subsidize and lower fees on checking and branching services and thus help attract deposits. United States data illustrates the financial deepening effect of this market power. Commercial banks’ ability to lower deposit interest rates diminishes when their deposits become closer substitutes to nonbank liabilities requiring greater interest rate competition. Lack of bank deposit market power, including through capital account mobility, may lessen financial deepening.

Keywords: WP; market power; commercial bank; bank deposit; banking industry; Financial liberalization; financial deepening; bank market structure; interest margin; deposit interest rate ceiling; ceiling regulation; price war; interest rate regulation; deposit interest rate market power; market structure; interest market power; deposit market power; regulation in the U.S.; demand slope; deposit demand slope; Deposit rates; Commercial banks; Interest payments; Interest rate ceilings; Loans (search for similar items in EconPapers)
Pages: 30
Date: 2000-03-01
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=3478 (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:imf:imfwpa:2000/038

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().