Factors Influencing the Demand for Rural Deposits in Bangladesh: A Test for Functional Form

Abstract

This paper uses Bangladesh district data to determine the functional form of the demand for rural deposits through the Box-Cox transformation. The results show that the Box-Cox form generates better results than the linear and log-linear forms. Interest rates, branch density, a roads and vehicle index and income positively influence demand for interest bearing deposits. The results of simulation of deposits under different interest rate and branching policy scenarios showed that depositors are more sensitive to interest rate changes than to branch density.