An Analysis of the Deposit-taking Market of Hong Kong |
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Authors: | Chan Bob Y. Khoo Terence |
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Affiliation: | (1) Department of Economics and Finance, City University of Hong Kong, Hong Kong;(2) HSBC James Capel Asia, Hong Kong |
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Abstract: | This paper analyzes the deposit-takingmarket in Hong Kong prior to the deregulation ofinterest rates in 1994. We argue that bankingregulations, in the forms of branching restrictionsand interest-rate ceilings, had created amonopsonistic market for short-term bank deposits. Asa result, banks in Hong Kong had earned asubstantially wider interest-rate margin than banks inother Asia-Pacific countries and the United States. We provide procedures to estimate the economicsignificance of the foregone interest and find themonopsonistic rent to be in the order of 1% of theGross Domestic Product of Hong Kong for the period1987 through 1994. |
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Keywords: | Bank regulation deposit-taking market interest-rate spread |
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