The relative influence of price and non-price factors on short-term retail deposit quantities?

John Ashton, Andros Gregoriou, Jerome Healy

Research output: Contribution to journalArticle

Abstract

This study explores how price and non-price factors influence change in the quantity of short-term retail deposits held by depository institutions. The analysis is undertaken for a sample of UK building societies over 23 years using a disaggregated data set with a two-stage econometric procedure involving system estimators in a panel framework using seemingly unrelated regression, generalised method of moments and an ordinary least-square fixed effects estimators to control for contemporaneous correlation and endogeneity concerns. Price factors examined include the policy or base rate and retail deposit interest rates set by individual building societies and non-price factors including the branch network and the number of deposit accounts offered by individual building societies. The cost of funds, one non-price factor and occurrence of mergers are consistently significant influences of retail deposit quantities. We conclude risk assessment of retail deposit quantity and monetary policy transmission would benefit from considering both price and non-price factors, rather than only price factors.
Original languageEnglish
Pages (from-to)1-23
Number of pages23
JournalEuropean Journal of Finance
DOIs
Publication statusPublished - 13 Mar 2015

Keywords

  • interest rate setting
  • deposits
  • risk assessment
  • monetary policy transmission
  • non-price factors
  • G21
  • G22

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