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612-822-4611
Sticky Deposit Rates

Sticky Deposit Rates

Paperback

Business General

ISBN10: 1503283461
ISBN13: 9781503283466
Publisher: Createspace
Published: Nov 19 2014
Pages: 36
Weight: 0.24
Height: 0.07 Width: 8.50 Depth: 11.02
Language: English
We examine the dynamics of eleven different deposit rates for a panel of over 2,500 branches of about 900 depository institutions observed weekly over ten years. We replicate previous work showing that rates are downwards-flexible and upwards-sticky, and show that a simple menu cost model can generate this behavior. The degree of asymmetric rigidity varies substantially by deposit type, bank size, and across branches of the same bank. In the absence of such stickiness, depositors would have received as much as $100 billion more in interest per year during periods when market rates were rising. These results also suggest that deposit rates are likely to lag increases in policy and market rates in future tightening cycles.

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Business General