Jiang, BoTzavellas, HectorYang, Xiaoying2022-04-222022-04-222022-04-20Jiang, B.; Tzavellas, H.; Yang, X. Deposit Competition, Interbank Market, and Bank Profit. J. Risk Financial Manag. 2022, 15, 194.http://hdl.handle.net/10919/109730In this paper, we study how the interbank market could impact deposit competition and bank profits. We first document two stylized facts: the net interbank funding ratio is negatively correlated with net interest margin (NIM), as well as with the cost-to-income ratio (CIR). To rationalize these two facts, we embed the interbank market into a BLP model framework. The model is calibrated using Chinese listed banks’ data. A counterfactual experiment reveals that shutting down the interbank market will lead to a decline in NIM and bank profits. Our results indicate that the interbank market can facilitate specialization and reduce the intensity of deposit competition.application/pdfenCreative Commons Attribution 4.0 Internationaldeposit competitioninterbank marketstructural estimationBLPBank ProfitabilityArticle - Refereed2022-04-21https://doi.org/10.3390/jrfm15050194