Interest Margins and Banks’ Asset-Liability Composition
This article examines the determinants of banks’ interest margins. The results suggest that short-term government bonds (floating debt) and the large share of interest-insensitive deposits held by banks are the key determinants of the interest margin. This is in contrast to the popular perception that the market power of the oligopolistic industry contributes to banks’ high interest margins. While a behavioral change—a greater inclination to save and an increase in output—might reduce the share of interest-insensitive deposits, the reduction in government debt depends on the state of certain macro-variables and macroeconomic management. Given these determinants and the possible ways of containing margins, the containment process is a tall order. The study also implicitly confirms that government borrowing is crowding out private investment.
Volume (Year): 16 (2011)
Issue (Month): Special Edition (September)
|Contact details of provider:|| Postal: |
Phone: (92-42) 6560939
Web page: http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/LJEIntro.aspx
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laura Valderrama & Wendell A. Samuel, 2006. "The Monetary Policy Regime and Banking Spreads in Barbados," IMF Working Papers 06/211, International Monetary Fund.
- Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
- Berger, Allen N & Hannan, Timothy H, 1989.
"The Price-Concentration Relationship in Banking,"
The Review of Economics and Statistics,
MIT Press, vol. 71(2), pages 291-99, May.
- Allen N. Berger & Timothy H. Hannan, 1988. "The price-concentration relationship in banking," Finance and Economics Discussion Series 23, Board of Governors of the Federal Reserve System (U.S.).
- 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.).
- 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.
- 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, pages 511-542.
- Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 511-37, June.
- David Neumark & Steven A. Sharpe, 1989.
"Market structure and the nature of price rigidity: evidence from the market for consumer deposits,"
Finance and Economics Discussion Series
52, Board of Governors of the Federal Reserve System (U.S.).
- Neumark, David & Sharpe, Steven A, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 657-80, May.
- Franklin R. Edwards, 1965. "Concentration And Competition In Commercial Banking: A Statistical Study," Journal of Finance, American Finance Association, vol. 20(1), pages 101-102, 03.
- Corvoisier, Sandrine & Gropp, Reint, 2002.
"Bank concentration and retail interest rates,"
Journal of Banking & Finance,
Elsevier, vol. 26(11), pages 2155-2189, November.
- Timothy H. Hannan & J. Nellie Liang, 1993. "Bank commercial lending and the influence of thrift competition," Finance and Economics Discussion Series 93-39, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Paola Sapienza, 2002. "The Effects of Banking Mergers on Loan Contracts," Journal of Finance, American Finance Association, vol. 57(1), pages 329-367, 02.
When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:16:y:2011:i:sp:p:255-270. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shahid Salahuddin)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.