Determinants of Bank Interest Margins in the Caucasus and Central Asia

April 29, 2015

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In this paper, we use a bank-level panel dataset to investigate the determinants of bank interest margins in the Caucasus and Central Asia (CCA) over the period 1998–2013. We apply the dealership model of Ho and Saunders (1981) and its extensions to assess the extent to which high spreads of banks in the CCA can be related to bank-specific variables, to competition, and to macroeconomic factors. We find that interest spreads are affected by operating cost, credit risk, liquidity risk, bank size, bank diversification, banking sector competition, and macroeconomic policies; but the impact depends on the country.

Subject: Banking, Central bank policy rate, Credit risk, Loans, Market risk

Keywords: bank, interest, interest margin, WP

Pages:
29
Volume:
2015
DOI:
https://doi.org/10.5089/9781484342817.001
Issue:
087
Series:
Working Paper No. 2015/087
Stock No:
WPIEA2015087
ISBN:
9781484342817
ISSN:
1018-5941

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