Macroeconomic and market determinants of interest rate spreads in low- and middle-income countries
AbstractNumerous variables exogenous to the operations of commercial banks have been widely touted in academic literature and popular discourse to be important factors causing the typically high Interest Rate Spreads (IRS) in developing countries. Using data for a group of 33 countries, this article applies dynamic panel estimation techniques to investigate the macroeconomic and market determinants of banking sector IRS in low- and middle-income countries. The empirical results suggest that only one market specific factor, the banking sector reserve requirement, significantly and positively affects IRS. Conversely, several macroeconomic and macro-policy variables such as inflation, government crowding-out and the discount rate are important determinants of IRS. Results are also examined to ascertain whether the determinants of spreads vary across regional groupings of countries.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 19 (2009)
Issue (Month): 6 ()
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- Tatum Blaise Pua Tan, 2012. "Determinants of Credit Growth and Interest Margins in the Philippines and Asia," IMF Working Papers 12/123, International Monetary Fund.
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