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Author(s) / Editor(s): 
  • Ana María Iregui, Jesús Otero

Testing the Law of One Price in Retail Banking: An Analysis for Colombia Using a Pair-wise Approach

We apply a pair-wise approach to test the law of one price for deposit (lending) rates in Colombia. We find that when banks are of different size deposit rates adjust quickly, suggesting a competitive environment. By contrast, lending rates adjust rapidly when banks are of similar size, supporting market segmentation.