IDEAS home Printed from https://ideas.repec.org/a/eee/jebusi/v114y2021ics0148619520304021.html
   My bibliography  Save this article

Financial access and interest rate spread: An international assessment

Author

Listed:
  • de Moraes, Claudio
  • Galvis-Ciro, Juan Camilo
  • Gargalhone, Micheli

Abstract

The present study evaluates the hypothesis that countries where banks expand financial access through branches and ATM networks have smaller interest rate spreads. To do so, the financial access index produced by the International Monetary Fund was used to capture financial access through bank branches and ATMs (automated teller machines). Through a data panel analysis of 68 countries during the period between 2006 and 2015, the results of this study indicate that the bank interest rate spread is lower in countries with greater financial access. However, this effect is decreasing, indicating a limit to the effect on the spread.

Suggested Citation

  • de Moraes, Claudio & Galvis-Ciro, Juan Camilo & Gargalhone, Micheli, 2021. "Financial access and interest rate spread: An international assessment," Journal of Economics and Business, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:jebusi:v:114:y:2021:i:c:s0148619520304021
    DOI: 10.1016/j.jeconbus.2020.105958
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148619520304021
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeconbus.2020.105958?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Grohmann, Antonia & Klühs, Theres & Menkhoff, Lukas, 2018. "Does financial literacy improve financial inclusion? Cross country evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 111, pages 84-96.
    2. Mr. Calixte Ahokpossi, 2013. "Determinants of Bank Interest Margins in Sub-Saharan Africa," IMF Working Papers 2013/034, International Monetary Fund.
    3. Allen, Franklin & Demirguc-Kunt, Asli & Klapper, Leora & Martinez Peria, Maria Soledad, 2016. "The foundations of financial inclusion: Understanding ownership and use of formal accounts," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 1-30.
    4. Cúrdia, Vasco & Woodford, Michael, 2016. "Credit Frictions and Optimal Monetary Policy," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 30-65.
    5. Annamaria Lusardi & Olivia S. Mitchell, 2008. "Planning and Financial Literacy: How Do Women Fare?," American Economic Review, American Economic Association, vol. 98(2), pages 413-417, May.
    6. Ratna Sahay & Martin Cihak & Papa M N'Diaye & Adolfo Barajas & Srobona Mitra & Annette J Kyobe & Yen N Mooi & Seyed Reza Yousefi, 2015. "Financial Inclusion; Can it Meet Multiple Macroeconomic Goals?," IMF Staff Discussion Notes 15/17, International Monetary Fund.
    7. Birchwood, Anthony & Brei, Michael & Noel, Dorian M., 2017. "Interest margins and bank regulation in Central America and the Caribbean," Journal of Banking & Finance, Elsevier, vol. 85(C), pages 56-68.
    8. Richard Adjei Dwumfour, 2018. "Explaining banking spread," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 11(1), pages 139-156, September.
    9. de Moraes, Claudio Oliveira & de Mendonça, Helder Ferreira, 2019. "Bank’s risk measures and monetary policy: Evidence from a large emerging economy," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 121-132.
    10. Adele Atkinson & Flore-Anne Messy, 2013. "Promoting Financial Inclusion through Financial Education: OECD/INFE Evidence, Policies and Practice," OECD Working Papers on Finance, Insurance and Private Pensions 34, OECD Publishing.
    11. Aydemir, Resul & Guloglu, Bulent, 2017. "How do banks determine their spreads under credit and liquidity risks during business cycles?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 147-157.
    12. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    13. Ms. Ratna Sahay & Mr. Martin Cihak & Mr. Papa M N'Diaye & Mr. Adolfo Barajas & Ms. Srobona Mitra & Ms. Annette J Kyobe & Yen N Mooi & Mr. Seyed Reza Yousefi, 2015. "Financial Inclusion: Can it Meet Multiple Macroeconomic Goals?," IMF Staff Discussion Notes 2015/017, International Monetary Fund.
    14. Vasco Cúrdia & Michael Woodford, 2010. "Credit Spreads and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 3-35, September.
    15. Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, vol. 63(1), pages 113-134, October.
    16. Kaiguo Zhou & Michael C. S. Wong, 2008. "The Determinants of Net Interest Margins of Commercial Banks in Mainland China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(5), pages 41-53, September.
    17. Thakor, Anjan V. & Boot, Arnoud (ed.), 2008. "Handbook of Financial Intermediation and Banking," Elsevier Monographs, Elsevier, edition 1, number 9780444515582.
    18. Ozgur Emre Ergungor, 2010. "Bank Branch Presence and Access to Credit in Low- to Moderate-Income Neighborhoods," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1321-1349, October.
    19. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early-Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    20. Loan Thi-Hong Van & Anh The Vo & Nhan Thien Nguyen & Duc Hong Vo, 2021. "Financial Inclusion and Economic GROWTH: An International Evidence," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(1), pages 239-263, January.
    21. Pires Tiberto, Bruno & Oliveira de Moraes, Claudio & Pio Corrêa, Paloma, 2020. "Does transparency of central banks communication affect credit market? Empirical evidence for advanced and emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    22. López, Tania & Winkler, Adalbert, 2019. "Does financial inclusion mitigate credit boom-bust cycles?," Journal of Financial Stability, Elsevier, vol. 43(C), pages 116-129.
    23. Li, Linyang, 2018. "Financial inclusion and poverty: The role of relative income," China Economic Review, Elsevier, vol. 52(C), pages 165-191.
    24. Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
    25. Anarfo, Ebenezer Bugri & Abor, Joshua Yindenaba & osei, Kofi Achampong, 2020. "Financial regulation and financial inclusion in Sub-Saharan Africa: Does financial stability play a moderating role?," Research in International Business and Finance, Elsevier, vol. 51(C).
    26. Dipasha Sharma, 2016. "Nexus between financial inclusion and economic growth," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 8(1), pages 13-36, April.
    27. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    28. Claire Célerier & Adrien Matray, 2019. "Bank-Branch Supply, Financial Inclusion, and Wealth Accumulation," The Review of Financial Studies, Society for Financial Studies, vol. 32(12), pages 4767-4809.
    29. Christopher R. Knittel & Victor Stango, 2009. "How Does Incompatibility Affect Prices?: Evidence From Atm'S," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 557-582, September.
    30. Anthony Birchwood & Michael Brei & Dorian Noel, 2017. "Interest margins and bank regulation in Central America and the Caribbean," Post-Print hal-01589197, HAL.
    31. Kim, Moshe & Vale, Bent, 2001. "Non-price strategic behavior: the case of bank branches," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1583-1602, December.
    32. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    33. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September.
    34. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
    35. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    36. Bianca De Paoli & Matthias Paustian, 2017. "Coordinating Monetary and Macroprudential Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 319-349, March.
    37. Hawtrey, Kim & Liang, Hanyu, 2008. "Bank interest margins in OECD countries," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 249-260, December.
    38. Ho, Thomas S. Y. & Saunders, Anthony, 1981. "The Determinants of Bank Interest Margins: Theory and Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(4), pages 581-600, November.
    39. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
    40. Carbo Valverde, Santiago & Rodriguez Fernandez, Francisco, 2007. "The determinants of bank margins in European banking," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2043-2063, July.
    41. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early‐Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    42. Katsiaryna Svirydzenka, 2016. "Introducing a New Broad-based Index of Financial Development," IMF Working Papers 2016/005, International Monetary Fund.
    43. Barth, James R. & Lin, Chen & Ma, Yue & Seade, Jesús & Song, Frank M., 2013. "Do bank regulation, supervision and monitoring enhance or impede bank efficiency?," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2879-2892.
    44. Alexandr Akimov & Albert Wijeweera & Brian Dollery, 2009. "Financial development and economic growth: evidence from transition economies," Applied Financial Economics, Taylor & Francis Journals, vol. 19(12), pages 999-1008.
    45. Ozgur Emre Ergungor, 2010. "Bank Branch Presence and Access to Credit in Low‐ to Moderate‐Income Neighborhoods," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1321-1349, October.
    46. Xavier Vives, 2016. "Competition and Stability in Banking: The Role of Regulation and Competition Policy," Economics Books, Princeton University Press, edition 1, number 10741.
    47. Catalán-Herrera, Juan & Arriaza, Juan Carlos & Alvarado, Ricardo, 2019. "Is the financial accelerator story, empirically relevant for the determinants of the interest rate spread?," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 37-47.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Faris Alshubiri, 2022. "The financial competition, concentration and structure of financial performance nexus in the financial sector of Oman," Economic Change and Restructuring, Springer, vol. 55(2), pages 681-714, May.
    2. de Moraes, Claudio Oliveira & Roquete, Raphael Moses & Gawryszewski, Gustavo, 2023. "Who needs cash? Digital finance and income inequality," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 84-93.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pires Tiberto, Bruno & Oliveira de Moraes, Claudio & Pio Corrêa, Paloma, 2020. "Does transparency of central banks communication affect credit market? Empirical evidence for advanced and emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    2. Nguyen, Thach V.H. & Nguyen, Thai Vu Hong, 2022. "How do banks price liquidity? The role of market power," Global Finance Journal, Elsevier, vol. 53(C).
    3. Bismark Addai & Wenjin Tang & Adjei Gyamfi Gyimah & Kingsley Opoku Appiah, 2023. "Bank intermediation margins in transition banking domains: panel evidence from Africa," Economic Change and Restructuring, Springer, vol. 56(4), pages 2129-2167, August.
    4. Konstantins Benkovskis & Olegs Tkacevs & Karlis Vilerts, 2021. "Interest Rate Spreads in the Baltics and the Rest of the Euro Area: Understanding the Factors behind the Differences," Discussion Papers 2021/02, Latvijas Banka.
    5. Brei, Michael & Jacolin, Luc & Noah, Alphonse, 2020. "Credit risk and bank competition in Sub-Saharan Africa," Emerging Markets Review, Elsevier, vol. 44(C).
    6. Birchwood, Anthony & Brei, Michael & Noel, Dorian M., 2017. "Interest margins and bank regulation in Central America and the Caribbean," Journal of Banking & Finance, Elsevier, vol. 85(C), pages 56-68.
    7. Mudeer A. Khattak & Buerhan Saiti & Shabeer Khan, 2023. "Does market power explain margins in dual banking? Evidence from panel quantile regression," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1826-1844, April.
    8. Muhammed Hasan Yilmaz, 2017. "Factors Impacting Bank Net Interest Margin and the Role of Monetary Policy: Evidence from Turkey," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(2), pages 01-23, April.
    9. Li Xian Liu & Milind Sathye, 2019. "Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints," JRFM, MDPI, vol. 12(3), pages 1-21, July.
    10. Maria-Eleni K. Agoraki & Georgios P. Kouretas, 2019. "The determinants of net interest margin during transition," Review of Quantitative Finance and Accounting, Springer, vol. 53(4), pages 1005-1029, November.
    11. Gabriele Angori & David Aristei & Manuela Gallo, 2019. "Determinants of Banks’ Net Interest Margin: Evidence from the Euro Area during the Crisis and Post-Crisis Period," Sustainability, MDPI, vol. 11(14), pages 1-20, July.
    12. Trinugroho, Irwan & Agusman, Agusman & Tarazi, Amine, 2014. "Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?," Research in International Business and Finance, Elsevier, vol. 32(C), pages 139-158.
    13. Mimouni, Karim & Smaoui, Houcem & Temimi, Akram & Al-Azzam, Moh'd, 2019. "The impact of Sukuk on the performance of conventional and Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 42-54.
    14. López-Espinosa, Germán & Moreno, Antonio & Pérez de Gracia, Fernando, 2011. "Banks' Net Interest Margin in the 2000s: A Macro-Accounting international perspective," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1214-1233, October.
    15. Murad Khan & Abdul Jalil, 2020. "Determinants of Interest Margin in Pakistan: A Panel Data Analysis," Economies, MDPI, vol. 8(2), pages 1-14, March.
    16. Md. Shahidul Islam & Shin-Ichi Nishiyama, 2020. "The Determinants of Net Interest Margins of Commercial Banks: Panel Evidence from China, India and Japan," Discussion Papers 2014, Graduate School of Economics, Kobe University.
    17. Anthony Birchwood & Michael Brei & Dorian Noel, 2016. "Bank interest margins and regulation in Central America and the Caribbean," Working Papers hal-04141575, HAL.
    18. Saona, Paolo, 2016. "Intra- and extra-bank determinants of Latin American Banks' profitability," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 197-214.
    19. Raja Almarzoqi & Sami Ben Naceur, 2015. "Determinants of Bank Interest Margins in the Caucasus and Central Asia," IMF Working Papers 2015/087, International Monetary Fund.
    20. Pierluigi Bologna, 2017. "Banks’ maturity transformation: risk, reward, and policy," Temi di discussione (Economic working papers) 1159, Bank of Italy, Economic Research and International Relations Area.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:114:y:2021:i:c:s0148619520304021. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-economics-and-business .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.