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The Impact of States Owned Banks on Interest Rates Spread

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  • Alexandre Rands

    ()
    (Datamétrica Consultoria, Pesquisa e Telemarketing)

Abstract

This paper develops the hypothesis that the co-existence of state owned banks with privately owned banks together tends to raise interest rates spreads and profitability of privately owned banks. This hypothesis can help explain the relationship between the share of state owned banks and total banking assets and economic growth, as reported in the literature. Three empirical tests of the two parts of the main hypothesis are presented. Two of them rely on Brazilian monthly time series data and the other one uses a cross section regression with data for a sample of countries. One of them builds on an estimation of an expanded version of the composition of a rate of return of an asset under the market efficient hypothesis. Another one estimates a factor augmented vector autoregression (FAVAR) model. All of these tests give support to the hypotheses tested.

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Bibliographic Info

Paper provided by Datamétrica Consultoria Econômica in its series Working Papers with number 42.

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Length: 20 pages
Date of creation: 2005
Date of revision: 2005
Publication status: Published in Anais do XXXIII Encontro Nacional de Economia, 2005.
Handle: RePEc:dtm:wpaper:42

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Keywords: state owned banks; interest rate spreads; banking profitability; FAVAR.;

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