Economics Research Institute Study Paper
Utah State University Department of Economics
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We empirically examine interest rates established on the national market for insured thrift deposits during a period spanning passage of the Financial Institutions Reform, Recovery and Enhancement Act of 1989. Our analysis indicates that changes in the demand for funds by thrifts in periods of financial stress exerted a pronounced influence on the deposit rate premiums paid by thrifts over comparable Treasuries. This contrasts with the conventional wisdom that default risk is the primary systematic determinant of rate premiums.
Aadland, David M.; Dahl, Drew; and Stephens, Alan, "Deposit Rate Premiums and the Demand for Funds By Thrifts" (1999). Economic Research Institute Study Papers. Paper 154.