Deposit rate asymmetry and edgeworth cycles after hong kong’s interest rate deregulation

Research output: Chapter in book / Conference proceedingChapter in an edited book (as author)Academic researchpeer-review

Abstract

A full Edgeworth cycle of deposit rate is divided into two phases: an “over-cutting cycle” in which the banks battle for deposits, and a “relenting cycle” in which the banks cease battling and instead choose to restore a temporarily low deposit rate. Such strategies have two testable implications on overall market movements. First, deposit rate decreases are more likely to be initiated when the deposit rate is near the upper bound of a cycle. Second, deposit rate decreases are more sensitive than increases to market interest rate changes. This chapter empirically confirms this pattern and shows strong evidence for the presence of Edgeworth cycles in deposit rates after Hong Kong’s interest rate deregulation.

Original languageEnglish
Title of host publicationInternational Symposia in Economic Theory and Econometrics
EditorsW.A. Barnett, B.S. Sergi
PublisherEmerald Group Publishing Ltd.
Pages105-121
Number of pages17
Volume25
DOIs
Publication statusPublished - 2018

Publication series

NameInternational Symposia in Economic Theory and Econometrics
Volume25
ISSN (Print)1571-0386

Keywords

  • Asymmetry
  • Deposit rate
  • Deregulation
  • Edgeworth cycle
  • Hong Kong banks
  • Interest rate rules

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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