Determinants of Interest Rate Spreads in Solomon Islands
June 12, 2014
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Summary
Bank interest rate spreads in Solomon Islands are high by regional standards. This paper examines the determinants of bank interest rates including bank specific, banking sector, macroeconomic, and legal indicators. The results show that the scale of operation, overhead costs, concentration index, and some macroeconomic variables (i.e., monetary policy rates and real growth) significantly influence interest rate margins. The paper particularly focus on the influence of the banking sector structure and finds strong evidence of bank collusion.
Subject: Bank credit, Banking, Commercial banks, Financial institutions, Income, Inflation, Legal support in revenue administration, Loans, National accounts, Personal income, Prices, Revenue administration
Keywords: Asia and Pacific, bank, bank concentration, bank cost, bank risk aversion, bank specific, bank spread, banking spreads, banks in Solomon Islands, Commercial banks, correlated bank reaction, credit risk, financial intermediation, Income, Inflation, interest, interest rate, Legal support in revenue administration, Loans, market power, rate, risk-averse bank, Solomon Islands, WP
Pages:
24
Volume:
2014
DOI:
Issue:
105
Series:
Working Paper No. 2014/105
Stock No:
WPIEA2014105
ISBN:
9781498303651
ISSN:
1018-5941
