Testing the law of one price in retail banking: An analysis for Colombia using a pair-wise approach

Produced by: 
Banco de la República de Colombia
Available from: 
September 2012
Paper author(s): 
Ana María Iregui (Banco de la República de Colombia)
Jesús Otero (Universidad del Rosario)
Topic: 
Financial Economics
Year: 
2012

We apply a pair-wise approach to test the law of one price for deposit (lending) rates in Colombia. We find that when banks are of different size deposit rates adjust quickly, suggesting a competitive environment. By contrast, lending rates adjust rapidly when banks are of similar size, supporting market segmentation.

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Research section: 
Latest Research
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