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The determinants of net interest income in the Mexican banking system: an integrated model

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  • Maudos, Joaquin
  • Solisa, Liliana

Abstract

This paper analyzes net interest income in the Mexican banking system over the period 1993-2005. Taking as reference the seminal work by Ho and Saunders (1981) and subsequent extensions by other authors, our study models the net interest margin simultaneously including operating costs and diversification and specialization as determinants of the margin. The results referring to the Mexican case show that its high margins can be explained mainly by average operating costs and by market power. Although non-interest income has increased in recent years, its economic impact is low

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15257.

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Date of creation: 2009
Date of revision: 2009
Handle: RePEc:pra:mprapa:15257

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Keywords: banking; net interest income; operating cost; non-interest income;

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  1. Liliana Solís & Joaquín Maudos Villarroya, 2007. "Deregulation, Liberalization And Consolidation Of The Mexican Banking System: Effects On Competition," Working Papers. Serie EC, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2007-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  3. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(11), pages 2325-2335, November.
  4. Fausto Hernández-Trillo & Marcos Ávalos, 2006. "Competencia bancaria en México," Working papers, CIDE, División de Economía DTE 376, CIDE, División de Economía.
  5. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series, The World Bank 1900, The World Bank.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Maria Soledad Martinez Peria & Ashoka Mody, 2004. "How foreign participation and market concentration impact bank spreads: evidence from Latin America," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 511-542.
  8. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, Elsevier, vol. 79(2), pages 145-152, May.
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  10. Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 21(1), pages 55-87, January.
  11. Kazuhiko Hayakawa, 2005. "Small Sample Bias Propreties of the System GMM Estimator in Dynamic Panel Data Models," Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University d05-82, Institute of Economic Research, Hitotsubashi University.
  12. R. Gaston Gelos, 2009. "Banking Spreads In Latin America," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 47(4), pages 796-814, October.
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  14. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers, Center for Global Development 125, Center for Global Development.
  15. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, Elsevier, vol. 19(6), pages 813-832, December.
  16. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
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  19. Giovanni S.F. Bruno, 2004. "Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models," KITeS Working Papers, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy 159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
  20. Solís, Liliana & Maudos, Joaquín, 2008. "The social costs of bank market power: Evidence from Mexico," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 467-488, September.
  21. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(9), pages 2259-2281, September.
  22. Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, Elsevier, vol. 63(1), pages 113-134, October.
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