THE BURDENS/THE BENEFITS OF FEDERAL RESERVE MEMBERSHIP AND THE PRICING OF BANK SERVICES.

摘要

The objective of this research was to investigate the impact of Federal Reserve membership on the price of bank services, mainly average loan rates service charges on demand deposits and average deposit rates. In addition, this research investigated the influence of the ratio of member banks to total banks in the market on member banks pricing policies.;The research design involved the formulation of a system of equations incorporating bank inputs, output and the pricing of bank services. The system was estimated for all the sampled states (Illinois, Iowa, Kansas and Nebraska) as a group and for individual states (after the necessary modifications) using Three Stage Least Squares.;The data were secured from three sources: First, the balance sheets and income statements for insured commercial banks in the four sampled states from 1972-1977 were obtained from the Board of Governors of the Federal Reserve System. Second: total population, retail sales, effective buying income and median household effective buying income were obtained from various issues of Sales and Marketing Management magazine. Finally, the adjusted monetary base (seasonally adjusted) figures were obtained from Federal Reserve Bank of St. Louis.;Within the context of the theoretical framework that bank input, output, and the pricing decisions are simultaneously determined, the statistical results indicated that, on the average, member banks in the four states as a whole, had charged their customers lower average rates on loans, and lower service charges on demand deposits. In addition, the findings suggested that the higher the ratio of member banks to total banks in the market, the higher the service charges on demand deposits and the lower average rates on time and savings deposits. However, the statistical results indicated that the effect of FRS was contingent on the state where member banks were located. For individual state, the findings were as follows: (1)Illinois member banks charged their customers higher average rates on loans and lower service charges on demand deposits than nonmember banks. (2)Iowa member banks charged their customers higher average rates on loans, higher service charges on demand deposits and paid higher average rates on time and savings deposits than nonmember banks. Furthermore, the higher the ratio of member banks in the market, the higher the average loan rate and the service charges on demand deposits. (3)Kansas member banks charged their customers higher service charges on demand deposits and paid higher average rates on time and savings deposits than nonmember banks. Furthermore, the higher the concentration ratio of member banks in the market the lower the service charges on demand deposits and average deposits rate. (4)Nebraska member banks charged their customers lower average rates on loans, lower service charges on demand deposits and paid higher average rates on time and savings deposits. Furthermore, the higher the ratio of member banks in the market, the lower the service charges on demand deposits.;Including the interaction term between FRS membership and the ratio of member banks to total banks in the market yielded no statistically significant results for the sample as a whole. However, it was found that member banks in markets dominated by member banks charged their customers higher service charges on demand deposits (in the state of Illinois), lower service charges on demand deposits (in the state of Kansas) and paid higher average rates on time and savings deposits (in the state of Nebraska).