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The Impact of States Owned Banks on Interest Rates Spread

Author

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  • Alexandre Rands

    (Datamétrica Consultoria, Pesquisa e Telemarketing)

Abstract

This paper develops the hypothesis that the co-existence of state owned banks with privately owned banks together tends to raise interest rates spreads and profitability of privately owned banks. This hypothesis can help explain the relationship between the share of state owned banks and total banking assets and economic growth, as reported in the literature. Three empirical tests of the two parts of the main hypothesis are presented. Two of them rely on Brazilian monthly time series data and the other one uses a cross section regression with data for a sample of countries. One of them builds on an estimation of an expanded version of the composition of a rate of return of an asset under the market efficient hypothesis. Another one estimates a factor augmented vector autoregression (FAVAR) model. All of these tests give support to the hypotheses tested.

Suggested Citation

  • Alexandre Rands, 2005. "The Impact of States Owned Banks on Interest Rates Spread," Working Papers 42, Datamétrica Consultoria Econômica, revised 2005.
    • Handle: RePEc:dtm:wpaper:42
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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