DP6036 Bank Imputed Interest Rates: Unbiased Estimates of Offered Rates?

Author(s): Evren Örs , Tara Rice

Publication Date: January 2007

Keyword(s): deposit rates , imputed prices , product market , transaction prices

JEL(s): G21 , L11

Programme Areas: Financial Economics

Link to this Page: www.cepr.org/pubs/dps/DP6036.asp.asp

We examine whether “imputed” interest rates obtained from bank financial statements are unbiased estimates of “offered” interest rates that the same banks report in surveys. We find evidence of a statistically significant amount of bias. However, the statistical bias that we document does not appear to be economically significant. When used as dependent variables in regression analysis, imputed rates and offered rates lead to the same policy conclusions. Our work has important methodological implications for empirical research that examines the product market competition among depository institutions.