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Lookup NU author(s): Dr Robert Anderson,
Professor Robert Hudson,
Dr Gang Yi
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).
Understanding of how prices and other measures of value are established and change is critical to modern economics. Specifically, price stickiness often observed in goods and labour markets leading to a sluggish adjustment process from the micro to macro level and competitive concerns. This study examines this phenomena through assessing the prevalence of pricing points or convenience pricing in the market for retail savings products. A database of interest rates (the price of a savings product) representative of the UK retail deposit account market from 1989 to 2011 is used to examine whether price stickiness is conditional on the direction of price change and the scale of the prevailing interest rate. Using a 100-state Markov chain process, we find evidence that rates tend cluster around certain endings and that stickiness is conditional on the direction of the price change. This finding is consistent with a profit maximising bank strategy.
Author(s): Anderson RDJ, Ashton JK, Hudson RS, Yi G
Publication type: Conference Proceedings (inc. Abstract)
Publication status: Published
Conference Name: International Finance and Banking Society 7th International Conference
Year of Conference: 2015
Online publication date: 29/06/2015
Acceptance date: 25/03/2015
Date deposited: 05/09/2017
Publisher: International Finance and Banking Society