Open figure viewer
Purpose
This study aims to examine a potential case of interdependence in loan and deposit interest rate setting.
Design/methodology/approach
The authors set up a theoretical microsimulation model with endogenous loan interest rate determination via a learning algorithm.
Findings
The authors show that in certain environments, it may be beneficial for large banks to incorporate information on retail funding costs into the lending rate setting decision.
Originality/value
The author’s model is based on the realistic money creation mechanism.
Keywords:
Banks,
Money and interest rates,
Simulation modeling,
Money supply,
Lending rates,
Deposit rates,
Agent-based model,
E43,
E51,
G21,
C63
© Emerald Publishing Limited
2021
Emerald Publishing Limited
Licensed re-use rights only
You do not currently have access to this content.
