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Interest rate convergence across maturities: Evidence from bank data in an emerging market economy

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  • Holmes, Mark J.
  • Iregui, Ana María
  • Otero, Jesús

Abstract

Against a background of financial liberalisation reforms, we assess the extent of market integration and competition in Colombian retail deposits and loans markets. We employ a dataset comprising bank-level interest rate data for different financial products across a range of banks. We utilise and further develop the Phillips and Sul convergence club approach by estimating the drivers of club formation. We find integration of the deposits market, but not loans where portfolio riskiness and loan maturity explain why there is not a fully integrated market. Also, the degree of loan market convergence responds asymmetrically to changes in monetary policy.

Suggested Citation

  • Holmes, Mark J. & Iregui, Ana María & Otero, Jesús, 2019. "Interest rate convergence across maturities: Evidence from bank data in an emerging market economy," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 57-70.
    • Handle: RePEc:eee:ecofin:v:49:y:2019:i:c:p:57-70
    DOI: 10.1016/j.najef.2019.03.008
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    More about this item

    Keywords

    C33; E43; G21; Convergence clubs; Interest rates; Maturity; Colombia;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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