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Bank Efficiency and Market Structure; What Determines Banking Spreads in Armenia?

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  • Holger Floerkemeier
  • Era Dabla-Norris

Abstract

Despite far-reaching banking sector reforms and a prolonged period of macroeconomic stability and strong economic growth, financial intermediation in Armenia has lagged behind other transition countries, and interest rate spreads have remained higher than in most Central and Eastern European transition countries. This paper examines the determinants of interest rate spreads and margins in Armenia using a bank-level panel dataset for the period 2002 to 2006. We find that bank-specific factors, such as bank size, liquidity, and market power, as well as the market structure within which banks operate, explain a large proportion of crossbank, cross-time variation in spreads and margins. The results suggest that there is a large potential to increase cost efficiency and competition in the banking system.

Suggested Citation

  • 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.
  • Handle: RePEc:imf:imfwpa:07/134
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    Cited by:

    1. Soedarmono, Wahyoe & Tarazi, Amine, 2013. "Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly traded banks in Asia," Journal of Asian Economics, Elsevier, pages 91-100.
    2. Fungáčová, Zuzana & Poghosyan, Tigran, 2011. "Determinants of bank interest margins in Russia: Does bank ownership matter?," Economic Systems, Elsevier, vol. 35(4), pages 481-495.
    3. Khurshid Djalilov & Jens Hölscher, 2016. "Comparative Analyses Of The Banking Environment In Transition Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(208), pages 7-26, January -.
    4. Poghosyan, Tigran, 2010. "Re-examining the impact of foreign bank participation on interest margins in emerging markets," Emerging Markets Review, Elsevier, vol. 11(4), pages 390-403, December.
    5. King Banaian, 2009. "Macroeconomic Impact of the Financial Crisis on Armenia," Working Papers 2009-1, Saint Cloud State University, Department of Economics, revised 14 Aug 2009.
    6. Brown, Martin & Maurer, Maria Rueda & Pak, Tamara & Tynaev, Nurlanbek, 2009. "The impact of banking sector reform in a transition economy: Evidence from Kyrgyzstan," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1677-1687, September.
    7. Chuling Chen, 2009. "Bank Efficiency in Sub-Saharan African Middle Income Countries," IMF Working Papers 09/14, International Monetary Fund.

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    Keywords

    Armenia; Banking systems; Interest rates; Banking system; interest rate spreads; banking; foreign bank; foreign banks; bank size;

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