Rajesh P. Narayanan
Lousiana Bankers Association Professor of Finance Louisiana State University
- Baton Rouge LA
Dr. Narayanan is an international expert in financial markets, banking, fintech and cryptocurrencies.
Areas of Expertise
Biography
As a sought-after speaker and advisor, Dr. Narayanan has delivered executive briefings and conducted policy seminars across six countries—Brazil, China, the Czech Republic, India, Malaysia, and South Africa—working directly with senior executives and government technocrats on critical financial sector issues.
His analysis and insights are frequently featured in major national media including the Wall Street Journal, CNN/Money, Bloomberg, and Fortune, as well as regional outlets such as The Times-Picayune, The Advocate, Baton Rouge Business Report, WBRZ-TV, and WWL-Radio, where he provides expert commentary on market developments and banking policy.
Research Focus
Bank Mergers & Capital Markets
Dr. Narayanan’s current research focus is on the changing structure of the banking industry, the role of FinTech in the provision of financial services, and financial stability issues associated with digital assets like Stablecoins and Cryptocurrencies.
Answers
- The Fed just cut interest rates—what does that really mean for consumers, from mortgages to credit cards to savings?
When the Fed announces a rate cut, consumers often expect interest rates on the financial products they use to go down as well, but it isn’t always that straightforward. Savings:With deposit products, high-yield savings rates are the ones most likely to be affected. Many account holders may have already seen their rates go down in anticipation of this rate cut. Others may have to wait for their financial institutions to lower rates. Because the Fed is expected to continue cutting this year and throughout 2026, savings rates might continue to drop. Certificate of deposit (CD) rates are also likely to go down now that the Fed has cut rates, more so for short-term CDs compared to long-term CDs. So, locking in a CD rate now might be a good idea if you’re worried about future Fed cuts. Home Borrowing Costs:You should see an almost immediate drop in Home Equity Line of Credit (Heloc) rates because these rates are variable and tied to an index, often the prime rate. The prime rate follows the federal-funds rate, which means that when the Fed cuts rates, HELOC borrowers on both new and existing loans typically benefit. Home equity loan rates however may not see much of an impact as these rates are fixed and the rate cut has largely already been priced in. With long term mortgages, their rates are benchmarked to the yield on the 10-year Treasury rate. Historically, changes in the Fed’s benchmark rate (which is the short-term, overnight rate) are barely correlated with long-term mortgage rates. What we have actually seen since the Fed started lowering rates is that mortgage rates have moved in the opposite direction. This is because the 10-year Treasury yields have risen over concerns about the economy, expanding deficits and trade wars.Credit cards:With credit cards, the rates may come down a bit, but not much to make a difference because the rates are still at historic highs. The Fed tends to cut rates when it is concerned about the economy, which means borrowers may find it harder to repay, and banks price that risk in the way they price their credit cards.
- With interest rates, inflation, and banking stability in the headlines, what signals should everyday people watch to understand where the financial system is headed?
The financial system, which is comprised of financial institutions (banks) and financial markets, moves the savings in the economy to investments via credit and capital flows. Both credit and capital markets provide leading indicators of where the economy is headed. Banks create credit, and therefore people should look for signs that indicate when banks become more cautious about lending or when they see headlines about banks stress. This means that credit will become harder to get, which can slow the economy even if other indicators look healthy. They can also look for signs from the financial market. When the term spread, which is the difference between long and short- term rates is positive, it typically signals expectation of economic growth and higher future rates. When it is negative or inverted, it signals expectations of slower growth or even a recession as markets anticipate future rate cuts.
Education
Florida State University
Ph.D.
Finance
1996
Media Appearances
Research@Ourso: The Case of the Disappearing Bank Branches
Louisiana State University online
2025-07-07
Following decades of consistent growth, the number of bank branches in the U.S. peaked in 2010 and has been declining ever since, a trend that accelerated dramatically after the COVID-19 pandemic. A new working paper with the National Bureau of Economic Research (NBER) by Rajesh P. Narayanan, professor in the LSU Department of Finance, alongside co-authors Philip Strahan (Boston College) and Dimuthu Ratnadiwakara (Federal Reserve Bank of Richmond), suggests that this decline is driven by technology, which has fundamentally altered the profitability of local bank branches by making customers more powerful and less loyal.
What does a rate cut mean in the real world?
Talk 107.3 FM Baton Rouge radio
2024-09-18
Dr. Rajesh Narayanan from LSU shared insights on the Federal Reserve’s anticipated rate cuts and their potential impacts on the economy. The Fed is primarily focused on two key indicators: inflation and unemployment. Currently, both metrics are trending favorably, with inflation dropping from around 9% post-pandemic to approximately 3-3.5%, and unemployment nearing the Fed’s target of around 2%.
This week’s anticipated interest rate cut, explained
Greater Baton Rogue Business Report online
2024-09-16
After months of speculation, it now seems exceedingly likely that the Federal Reserve will finally cut interest rates at its meeting on Wednesday. LSU finance professor Rajesh Narayanan tells D…
How should businesses respond to the massive OMV hack?
Greater Baton Rogue Business Report online
2023-06-16
A cyberattack on MOVEit, a third-party tool used to transfer large files, has compromised some 6 million records at the Louisiana Office of Motor Vehicles, state officials said today.
CYBER ATTACK: How to freeze your credit
WAFB 9 tv
2023-06-16
Louisiana leaders are recommending that residents who have a state driver’s license, state identification card, or car registration take steps to protect hackers from accessing their credit.
Articles
The Decline of Bank Branching
National Bureau of Economic Research Working Paper2025
We study U.S. bank branch openings and closings from 2001 to 2023. Both are more common in areas with low deposit franchise value, a consequence of greater interest-rate sensitivity among financially sophisticated households with higher digital banking adoption. The effects are strongest for large banks. Lending plays a minimal role. Incumbents retain branches where depositors are less sensitive to rates because they can extract deposit spreads; entrants avoid such markets because sticky customers are difficult to attract. The pandemic accelerated closures by increasing digital reliance. Our findings highlight deposit franchise value as the primary driver of modern branch restructuring.
The paradox of slave collateral
Explorations in Economic History2025
As mobile financial assets, slaves have high liquidation value that makes them desirable as loan collateral. The mobility of slaves also makes them insecure collateral because borrowers could sell slaves to outside buyers or move them beyond the reach of creditors. We contend that creditors balanced the opposing forces of liquidity and security in deciding whether to extend credit against slave collateral. Using an original sample of New Orleans mortgage and sales records, we find that relatively few loans were backed with slave collateral and that slave buyers paid higher interest rates for their loans.
Will Neural Scaling Laws Activate Jevons' Paradox in AI Labor Markets? A Time-Varying Elasticity of Substitution (VES) Analysis
arXiv preprint2025
We develop a formal economic framework to analyze whether neural scaling laws in artificial intelligence will activate Jevons' Paradox in labor markets, potentially leading to increased AI adoption and human labor substitution. By using a time-varying elasticity of substitution (VES) approach, we establish analytical conditions under which AI systems transition from complementing to substituting for human labor. Our model formalizes four interconnected mechanisms: (1) exponential growth in computational capacity (C(t) = C(0) \cdot e^{g \cdot t}); (2) logarithmic scaling of AI capabilities with computation (\sigma(t) = \delta \cdot \ln(C(t)/C(0))); (3) declining AI prices (p_A(t) = p_A(0) \cdot e^{-d \cdot t}); and (4) a resulting compound effect parameter (\phi = \delta \cdot g) that governs market transformation dynamics.
Can the Nexus of Scaling Laws Coupled with Constant or Variable Elasticity of Substitution Predict AI and Other Technology Adoption?
arXiv preprint2025
Emergent technologies such as solar power, electric vehicles, and artificial intelligence (AI) often exhibit exponential or power function price declines and various ``S-curves'' of adoption. We show that under CES and VES utility, such price and adoption curves are functionally linked. When price declines follow Moore's, Wright's and AI scaling "Laws,'' the S-curve of adoption is Logistic or Log-Logistic whose slope depends on the interaction between an experience parameter and the elasticity of substitution between the incumbent and emergent good. These functional relations can serve as a building block for more complex models and guide empirical specifications of technology adoption.
Depositor Characteristics and Deposit Stability
SSRN2024
Using cellphone geolocation data to identify the characteristics of bank depositors, we document considerable heterogeneity in terms of the age, income, education, and financial sophistication of depositors across banks and branches. We show that depositor characteristics influence a bank's rate-setting behavior and its deposit flows. Despite increasing deposit rates, banks with financially sophisticated depositors suffered greater deposit runoffs when market interest rates increased during 2022-2023, reducing the economic value generated per dollar of deposits by approximately 30%. Our findings suggest that assessments of bank stability could benefit from incorporating information on a bank's depositor base.
The rank-size rule and challenges in diversifying commercial real estate portfolios
The Journal of Real Estate Finance and Economics2023
The strategy of geographically diversifying a portfolio of commercial real estate assets is an intuitive approach for risk management. However, due to high concentrations of these assets in major metropolitan areas, investors may face additional constraints in the portfolio optimization process. The rank-size rule, a log-linear relationship between city rank and size, provides one of the greatest empirical regularities in regional science. As such, it serves as a possible theoretical guide to the weights given to properties by location in a commercial real estate portfolio. This paper sets forth some ideas relating to the concentration side of portfolio variance and the limiting effect that large concentrations may have on the ability to diversify risk.
Valuation when disaster risks increase at an increasing rate
Economics Letters2023
Atmospheric CO 2 been growing at an increasing rate for many years and this suggests that investments may face an increasing rate of future disaster risk. We provide a simple variation of the Gordon Growth model that accounts for potential increasing disaster risks and provides a closed-form bound to the reduction in value.
Demographic, jurisdictional, and spatial effects on social distancing in the United States during the COVID-19 pandemic
PLOS ONE2020
Social distancing, a non-pharmaceutical tactic aimed at reducing the spread of COVID-19, can arise because individuals voluntarily distance from others to avoid contracting the disease. Alternatively, it can arise because of jurisdictional restrictions imposed by local authorities. We run reduced form models of social distancing as a function of county-level exogenous demographic variables and jurisdictional fixed effects for 49 states to assess the relative contributions of demographic and jurisdictional effects in explaining social distancing behavior. To allow for possible spatial aspects of a contagious disease, we also model the spillovers associated with demographic variables in surrounding counties as well as allow for disturbances that depend upon those in surrounding counties.
Price Discovery in the Residential Mortgage-backed Security, Credit Default Swap, and ABX Markets
Credit Default Swap, and ABX Markets2020
This paper analyzes price discovery among residential mortgage-backed securities (MBS), their credit default swaps (ABCDS), and the associated ABX contracts. VECM regressions show that the MBS and ABX markets lead price discovery over the ABCDS market. Neither the MBS nor the ABX market consistently dominate one another so that MBS and ABX markets respond to information simultaneously. Thus, while there is evidence that ABCDS were mispriced, there is no evidence for ABX market “overshooting” that was previously thought to have helped cause the recent mortgage market bubble and bust.
Media
