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Interest Rate Spreads in English-Speaking African Countries

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  • Joe Crowley
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    Abstract

    This paper examines interest rate spreads in English-speaking African countries. Higher spreads were found to be associated with lower inflation, a greater number of banks, and greater public ownership of banks. Higher deposit interest rates were found to be associated with lower interest rate spreads, but higher net interest margins. A large increase in spreads in the late 1980s and 1990s may be explained by a strengthening of financial sector supervision. Limited data suggested that poor governance, weak regulatory frameworks and property rights, and higher required reserve ratios are associated with higher spreads.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/101.

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    Length: 34
    Date of creation: 01 Apr 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/101

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    Related research

    Keywords: Interest rates; inflation; banking; banking sector; money growth; lower inflation; banking system; average inflation; monetary policy; bank spreads; bank ownership; banking sector assets; banks ? loan; bank interest margins; capital adequacy; net interest margin; retail banking; bank interest; loan concentration; reserve ratio; bank management; banking systems; high inflation; effect of inflation; bank behavior; bank competition; real systemic banking crisis; capital adequacy ratio; excess liquidity; banking market; bank data; increase in inflation; mortgage lending; change in inflation; bank margins; bank regulations; banking crisis; inflation rate; high bank policy; bank assets; private bank;

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    1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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    3. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    4. Ruby Randall, 1998. "Interest Rate Spreads in the Eastern Caribbean," IMF Working Papers 98/59, International Monetary Fund.
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    6. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-56, May.
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    8. Beck, T.H.L., 2000. "Impediments to the development and efficiency of financial intermediation in Brazil," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508411, Tilburg University.
    9. Demirguc, Asli & Laeven, Luc & Levine, Ross, 2003. "The impact of bank regulations, concentration, and institutions on bank margins," Policy Research Working Paper Series 3030, The World Bank.
    10. Ben S. Bernanke, 1990. "On the predictive power of interest rates and interest rate spreads," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 51-68.
    11. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2005. "Bank Concentration and Fragility: Impact and Mechanics," NBER Working Papers 11500, National Bureau of Economic Research, Inc.
    12. repec:fth:wobaco:1083 is not listed on IDEAS
    13. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
    14. 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.
    15. Allen N. Berger & Timothy H. Hannan, 1987. "The price-concentration relationship in banking," Research Papers in Banking and Financial Economics 100, Board of Governors of the Federal Reserve System (U.S.).
    16. Mohsin S. Khan & A. Senhadji Semlali, 2000. "Financial Development and Economic Growth," IMF Working Papers 00/209, International Monetary Fund.
    17. Ephraim W. Chirwa & Montfort Mlachila, 2004. "Financial Reforms and Interest Rate Spreads in the Commercial Banking System in Malawi," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 5.
    18. 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.
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    Cited by:
    1. Hossain, Monzur, 2010. "Financial Reforms and Persistently High Bank Interest Spreads in Bangladesh: Pitfalls in Institutional Development?," MPRA Paper 24755, University Library of Munich, Germany.
    2. Kozo Kiyota & Barbara Peitsch & Robert M. Stern, 2007. "The Case for Financial Sector Liberalization in Ethiopia," Working Papers 567, Research Seminar in International Economics, University of Michigan.

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