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Consumer deposit demand, interest rate differentials, and public welfare

Authors
Journal
Journal of Accounting and Public Policy
0278-4254
Publisher
Elsevier
Publication Date
Volume
3
Issue
1
Identifiers
DOI: 10.1016/0278-4254(84)90011-5
Disciplines
  • Economics

Abstract

Abstract Empirical estimates of the bank certificate of deposit demand schedule obtained in this study provide the basis for evaluating interest rate deregulation. A Box-Jenkins transfer function estimates bank deposit responses to intraindustry pricing changes and a sensitivity analysis shows microeconomic effects of interest rate differentials. The study concludes that 1) the public substantially subsidizes banks but banks achieve suboptimum deposit levels under thrift differential regulation, 2) removal of deposit rate regulation causes bank deposit demand schedules to shift slowly, not immediately, up with respect to interest rates, and 3) the consumer deposit demand curve is clearly interest elastic.

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