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The Monetary Policy Regime and Banking Spreads in Barbados

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Author Info
Wendell Samuel
Laura Valderrama
Abstract

The paper analyzes the determinants of banking spreads in Barbados, with a view to identifying the role of the monetary policy regime in explaining high spreads. The paper finds that interest rate spreads for Barbados are higher than would be suggested by its macroeconomic performance. Banking concentration and bank-specific variables, including bank size and provisions for nonperforming loans, do not have an important role in explaining variations in bank spreads. Rather, it appears that monetary policy variables, such as reserve requirements and capital controls, are the most important determinants of spreads.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/211.

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Length: 24 pages
Date of creation: 02 Oct 2006
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Handle: RePEc:imf:imfwpa:06/211

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Keywords: Interest rate spreads ; monetary policy regime ;

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  1. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Concentration and Crises," NBER Working Papers 9921, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 443-56, June. [Downloadable!] (restricted)
  3. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-83, June.
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  4. 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. [Downloadable!] (restricted)
  5. Kevin Greenidge & Karen Chase & Winston Moore & DeLisle Worrell, 2005. "Quantitative Assessment of a Financial System--Barbados," IMF Working Papers 05/76, International Monetary Fund. [Downloadable!]
  6. Ruby Randall, 1998. "Interest Rate Spreads in the Eastern Caribbean," IMF Working Papers 98/59, International Monetary Fund.
  7. 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. [Downloadable!] (restricted)
  8. Ephraim W. Chirwa & Montfort Mlachila, 2004. "Financial Reforms and Interest Rate Spreads in the Commercial Banking System in Malawi," IMF Staff Papers, Palgrave Macmillan Journals, vol. 51(1), pages 5. [Downloadable!] (restricted)
  9. Winston Moore & Roland Craigwell, 2002. "Market Power and Interest Rate Spreads in the Caribbean," International Review of Applied Economics, Taylor and Francis Journals, vol. 16(4), pages 391-405, October. [Downloadable!] (restricted)
  10. 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(04), pages 581-600, November. [Downloadable!]
  11. Timothy H. Hannan & J. Nellie Liang, 1993. "Bank commercial lending and the influence of thrift competition," Finance and Economics Discussion Series 93-39, Board of Governors of the Federal Reserve System (U.S.).
  12. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 379-408, May.
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  13. Thorsten Beck & Ross Levine, 2003. "Legal Institutions and Financial Development," NBER Working Papers 10126, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Gaston R. Gelos, 2006. "Banking Spreads in Latin America," IMF Working Papers 06/44, International Monetary Fund. [Downloadable!]
  15. Sy, Amadou N. R., 2002. "Emerging market bond spreads and sovereign credit ratings: reconciling market views with economic fundamentals," Emerging Markets Review, Elsevier, vol. 3(4), pages 380-408, December. [Downloadable!] (restricted)
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  16. Nobuhiro Kiyotaki & John Moore, 2005. "Financial Deepening," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 701-713, 04/05. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Idrees Khawaja & Musleh-ud Din, 2007. "Determinants of Interest Spread in Pakistan," PIDE-Working Papers 2007:22, Pakistan Institute of Development Economics. [Downloadable!]
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