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The impact of banking sector reform in a transition economy: Evidence from Kyrgyzstan

  • Brown, Martin
  • Maurer, Maria Rueda
  • Pak, Tamara
  • Tynaev, Nurlanbek

We examine the impact of financial sector reform on interest rate levels and spreads using Kyrgyz bank-level data from 1998 to 2005. We find that, in addition to macroeconomic stabilization, structural reforms to the banking sector significantly contributed to lower interest rates. In particular, our results suggest that foreign bank entry and regulatory efforts to increase average bank size were important in reducing deposit rates. In contrast, we find little evidence that banking sector reform or macroeconomic stabilization has impacted interest rate spreads.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 9 (September)
Pages: 1677-1687

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:9:p:1677-1687
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  1. Grigorian, David A. & Manole, Vlad, 2002. "Determinants of commercial bank performance in transition - an application of data envelopment analysis," Policy Research Working Paper Series 2850, The World Bank.
  2. 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.
  3. Berglöf, Erik & Bolton, Patrick, 2003. "The Great Divide and Beyond - Financial Architecture in Transition," CEPR Discussion Papers 3476, C.E.P.R. Discussion Papers.
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  7. Luca, Alina & Petrova, Iva, 2008. "What drives credit dollarization in transition economies?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 858-869, May.
  8. Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How foreign participation and market concentration impact bank spreads : evidence from Latin America," Policy Research Working Paper Series 3210, The World Bank.
  9. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2004. "Bank performance, efficiency and ownership in transitition countries," BOFIT Discussion Papers 7/2004, Bank of Finland, Institute for Economies in Transition.
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  12. Beck, Thorsten & Hesse, Heiko, 2009. "Why are interest spreads so high in Uganda?," Journal of Development Economics, Elsevier, vol. 88(2), pages 192-204, March.
  13. Martin Brown & Maria Rueda Maurer & Tamara Pak & Nurlanbek Tynaev, 2007. "Banking Sector Reform and Interest Rates in Transition Economies: Bank-Level Evidence from Kyrgyzstan," Working Papers 2007-07, Swiss National Bank.
  14. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
  15. Gianni De Nicoló & Sami Geadah & Dmitriy Rozhkov, 2003. "Financial Development in the CIS-7 Countries: Bridging the Great Divide," IMF Working Papers 03/205, International Monetary Fund.
  16. Holger Floerkemeier & Era Dabla-Norris, 2007. "Bank Efficiency and Market Structure: What Determines Banking Spreads in Armenia?," IMF Working Papers 07/134, International Monetary Fund.
  17. Havrylchyk, Olena, 2006. "Efficiency of the Polish banking industry: Foreign versus domestic banks," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 1975-1996, July.
  18. Steven Fries & Damien Neven & Paul Seabright & Anita Taci, 2006. "Market entry, privatization and bank performance in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(4), pages 579-610, October.
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