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Banking Spreads In Latin America

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  • R. GASTON GELOS

Abstract

Intermediation spreads in Latin America are high by international standards. This paper examines the determinants of bank interest margins in that region using bank‐ and country‐level data from 85 countries, including 14 Latin American economies. The results suggest that Latin America has higher interest rates, less efficient banks, and larger reserve requirements than other regions and that these factors have a significant impact on spreads. However, Latin American countries do not differ markedly from their peers in other aspects that are found important in determining the cost of financial intermediation, such as inflation and bank profit taxation. (JEL E43, E44, G21, O54)

Suggested Citation

  • R. Gaston Gelos, 2009. "Banking Spreads In Latin America," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 796-814, October.
  • Handle: RePEc:bla:ecinqu:v:47:y:2009:i:4:p:796-814
    DOI: 10.1111/j.1465-7295.2008.00144.x
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    File URL: https://doi.org/10.1111/j.1465-7295.2008.00144.x
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    Cited by:

    1. Saona, Paolo, 2016. "Intra- and extra-bank determinants of Latin American Banks' profitability," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 197-214.
    2. José Renato Haas Ornelas & Marcos Soares da Silva & Bernardus Ferdinandus Nazar Van Doornik, 2020. "Informational Switching Costs, Bank Competition and the Cost of Finance," Working Papers Series 512, Central Bank of Brazil, Research Department.
    3. Florian Leon, 2015. "What do we know about the role of bank competition in Africa?," Working Papers halshs-01164864, HAL.
    4. Luis Catao & Carmen Pages & Maria Fernanda Rosales, 2009. "Financial Dependence, Formal Credit and Informal Jobs - New Evidence from Brazilian Household Data," Research Department Publications 4642, Inter-American Development Bank, Research Department.
    5. Francois Boutin-Dufresne & Santiago Peña & Oral Williams & Tomasz A. Zawisza, 2013. "Benchmarking Banking Sector Efficiency Across Regional Blocks in Sub-Saharan Africa; What Room for Policy?," IMF Working Papers 13/51, International Monetary Fund.
    6. Birchwood, Anthony & Brei, Michael & Noel, Dorian M., 2017. "Interest margins and bank regulation in Central America and the Caribbean," Journal of Banking & Finance, Elsevier, vol. 85(C), pages 56-68.
    7. Emerson Erik Schmitz, 2020. "Effects of State-Owned Banks’ Programs to Stimulate Credit: evidence from Brazil," Working Papers Series 519, Central Bank of Brazil, Research Department.
    8. Murad Khan & Abdul Jalil, 2020. "Determinants of Interest Margin in Pakistan: A Panel Data Analysis," Economies, MDPI, Open Access Journal, vol. 8(2), pages 1-14, March.
    9. Christian Glocker & Pascal Towbin, 2012. "The Macroeconomic Effects of Reserve Requirements," WIFO Working Papers 420, WIFO.
    10. Ryota Nakatani, 2016. "Twin Banking and Currency Crises and Monetary Policy," Open Economies Review, Springer, vol. 27(4), pages 747-767, September.
    11. Yang, Fan, 2019. "The impact of financial development on economic growth in middle-income countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 74-89.
    12. Francisco Javier Sáez-Fernández & Andrés J. Picazo-Tadeo & Mercedes Beltrán-Esteve & Caroline Elliott, 2015. "Assessing the performance of the Latin American and Caribbean banking industry: Are domestic and foreign banks so different?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1006976-100, December.
    13. Li Xian Liu & Milind Sathye, 2019. "Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(3), pages 1-21, July.
    14. Tamayo, Cesar E. & Gomez, Jose E. & Valencia, Oscar, 2019. "Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data," Working papers 20, Red Investigadores de Economía.
    15. Bank for International Settlements, 2012. "Operationalising the selection and application of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 48.
    16. Vera-Gilces, Paul & Camino-Mogro, Segundo & Ordeñana-Rodríguez, Xavier & Cornejo-Marcos, Gino, 2020. "A look inside banking profitability: Evidence from a dollarized emerging country," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 147-166.
    17. Almeida, Fernanda Dantas & Divino, José Angelo, 2015. "Determinants of the banking spread in the Brazilian economy: The role of micro and macroeconomic factors," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 29-39.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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