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Behavioral Economics In Banking: Behavioral Factors As Determinants Of The Interest Rate Spread

Author

Listed:
  • Andrey Gurov

    (American University in Bulgaria, Bulgaria)

  • Milena Nikolova

    (American University in Bulgaria, Bulgaria)

  • Elena Stoyanova

    (American University in Bulgaria, Bulgaria)

Abstract

The paper discusses behavioral factors that affect banks’ clients and examines empirically their influence on banks’ interest rate spreads. We devise a model that combines macroeconomic variables, which have been considered in earlier works, along with variables that indicate behavioral patterns, combined in a single index. Empirical results show that the constructed behavioral index has positive effect on banks’ interest rate spread, suggesting that patterns of customer behavior related to making less rational choices enable banks to extract higher spreads.

Suggested Citation

  • Andrey Gurov & Milena Nikolova & Elena Stoyanova, 2018. "Behavioral Economics In Banking: Behavioral Factors As Determinants Of The Interest Rate Spread," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 6(3), pages 72-82.
    • Handle: RePEc:ejn:ejefjr:v:6:y:2018:i:3:p:72-82
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    References listed on IDEAS

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