IMF Working Papers Volume 2000 Issue 038: Financial Liberalization, Bank Market Structure, and Financial Deepening: An Interest Margin Analysis (2000)

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

Author:

Mr. Abdourahmane Sarr

Mr. Abdourahmane Sarr
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Series:: IMF Working Papers

Volume/Issue:: Volume 2000: Issue 038

Language:: English

Publication Date:: 01 Mar 2000

DOI:: https://doi.org/10.5089/9781451845686.001

ISBN:: 9781451845686

ISSN:: 1018-5941

Pages:: 30

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

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2000: Issue 038

Language:: English

Publication Date:: 01 Mar 2000

DOI:: https://doi.org/10.5089/9781451845686.001

ISBN:: 9781451845686

ISSN:: 1018-5941

Pages:: 30

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

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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