An Analysis of the Deposit-taking Market of Hong Kong

An Analysis of the Deposit-taking Market of Hong Kong 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. Review of Industrial Organization Springer Journals

An Analysis of the Deposit-taking Market of Hong Kong

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Kluwer Academic Publishers
Copyright © 1998 by Kluwer Academic Publishers
Economics; Industrial Organization; Microeconomics
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