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An Analysis of the Deposit-taking Market of Hong Kong

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  • Bob Y. Chan
  • Terence Khoo

Abstract

This paper analyzes the deposit-taking market in Hong Kong prior to the deregulation of interest rates in 1994. We argue that banking regulations, in the forms of branching restrictions and interest-rate ceilings, had created a monopsonistic market for short-term bank deposits. As a result, banks in Hong Kong had earned a substantially wider interest-rate margin than banks in other Asia-Pacific countries and the United States. We provide procedures to estimate the economic significance of the foregone interest and find the monopsonistic rent to be in the order of 1% of the Gross Domestic Product of Hong Kong for the period 1987 through 1994.

Suggested Citation

  • Bob Y. Chan & Terence Khoo, 1998. "An Analysis of the Deposit-taking Market of Hong Kong," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(6), pages 651-667, December.
    • Handle: RePEc:kap:revind:v:13:y:1998:i:6:p:651-667
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    Cited by:

    1. Chong, Beng Soon, 2010. "Interest rate deregulation: Monetary policy efficacy and rate rigidity," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1299-1307, June.
    2. Kwan, Simon H., 2003. "Impact of deposit rate deregulation in Hong Kong on the market value of commercial banks," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2231-2248, December.
    3. Chun-Yu Ho, 2010. "Deregulation, competition and consumer welfare in a banking market: evidence from Hong Kong," Journal of Regulatory Economics, Springer, vol. 37(1), pages 70-97, February.
    4. Shin-ichi Fukuda & Junji Yamada, 2012. "Why Did Large-scale Deflation Occur? What Did It Bring About?: From Hong Kong's Experiences in the First Half of the 2000s," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(1), pages 93-122, June.

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