Bank Mergers and the Dynamics of Deposit Interest Rates

44 Pages Posted: 8 Jun 2016

See all articles by Ben R. Craig

Ben R. Craig

Federal Reserve Bank of Cleveland; Deutsche Bundesbank

Valeriya Dinger

Universität Osnabrück

Date Written: 2008

Abstract

Despite extensive research interest in the last decade, the banking literature has not reached a consensus on the impact of bank mergers on deposit rates. In particular, results on the dynamics of deposit rates surrounding bank mergers vary substantially across studies. In this paper, we aim for a comprehensive empirical analysis of a bank merger's impact on deposit rate dynamics. We base the analysis on a unique dataset comprising deposit rates of 624 US banks with a monthly frequency for the time period 1997-2006. These data are matched with individual bank and local market characteristics and the complete list of bank mergers in the US. The data allow us to track the dynamics of bank mergers while controlling for the rigidity of the deposit rates and for a range of merger, bank and local market features. An innovation of our work is the introduction of an econometric approach of estimating the change of the deposit rates given their rigidity.

Keywords: Deposit rate dynamics, bank mergers, deposit rate rigidity

JEL Classification: L11, G21

Suggested Citation

Craig, Ben R. and Dinger, Valeriya, Bank Mergers and the Dynamics of Deposit Interest Rates (2008). Bundesbank Series 2 Discussion Paper No. 2008,02, Available at SSRN: https://ssrn.com/abstract=2794006 or http://dx.doi.org/10.2139/ssrn.2794006

Ben R. Craig (Contact Author)

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101
United States
216-579-2061 (Phone)
216-579-3050 (Fax)

Deutsche Bundesbank

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Valeriya Dinger

Universität Osnabrück ( email )

Neuer Graben
Osnabrück, 49074
Germany

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