Financial liberalization, bank market structure, and financial deepening: An interest margin analysis

The dissertation argues that commercial banks' ability to lower deposit interest rates (market power) can increase deposit mobilization. Interest expenses saved can be used to lower fees on checking and branching services which can contribute to attracting more deposits on a net basis. United States data illustrates the financial deepening effect of this market power. Commercial banks' ability to lower deposit interest rates diminishes when their deposits become closer substitutes to nonbank liabilities requiring greater interest rate competition.