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Interest Rate Spreads in English-Speaking African Countries

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  • Joe Crowley

Abstract

This paper examines interest rate spreads in English-speaking African countries. Higher spreads were found to be associated with lower inflation, a greater number of banks, and greater public ownership of banks. Higher deposit interest rates were found to be associated with lower interest rate spreads, but higher net interest margins. A large increase in spreads in the late 1980s and 1990s may be explained by a strengthening of financial sector supervision. Limited data suggested that poor governance, weak regulatory frameworks and property rights, and higher required reserve ratios are associated with higher spreads.

Suggested Citation

  • Joe Crowley, 2007. "Interest Rate Spreads in English-Speaking African Countries," IMF Working Papers 07/101, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/101
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    Cited by:

    1. Cecilia Maigua & Gekara Mouni, 2016. "Influence of Interest Rates Determinants on the Performance of Commercial Banks in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(2), pages 121-133, April.
    2. Kozo Kiyota & Barbara Peitsch & Robert M. Stern, 2007. "The Case for Financial Sector Liberalization in Ethiopia," Working Papers 565, Research Seminar in International Economics, University of Michigan.
    3. Florian LEON, 2015. "What do we know about the role of bank competition in Africa?," Working Papers 201516, CERDI.
    4. Hossain, Monzur, 2012. "Financial reforms and persistently high bank interest spreads in Bangladesh: Pitfalls in institutional development?," Journal of Asian Economics, Elsevier, vol. 23(4), pages 395-408.
    5. David Tennant & Abiodun Folawewo, 2009. "Macroeconomic and market determinants of interest rate spreads in low- and middle-income countries," Applied Financial Economics, Taylor & Francis Journals, vol. 19(6), pages 489-507.
    6. Hong Liu & John Wilson, 2010. "The profitability of banks in Japan," Applied Financial Economics, Taylor & Francis Journals, vol. 20(24), pages 1851-1866.

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    Keywords

    Africa; Interest rates; Interest rate spreads; inflation; banking; banking sector; money growth; lower inflation;

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