What Drives Interest Rate Spreads in Pacific Island Countries? An Empirical Investigation
IMF Working Papers, May 4, 2015
Source details
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- What Drives Interest Rate Spreads in Pacific Island Countries? An Empirical Investigation
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Bibliographic details
- Authors: Fazurin Jamaludin, Vladimir Klyuev, Anuk Serechetapongse
- Published: May 4, 2015
- Series: IMF Working Papers
Authors and Publication
- By Fazurin Jamaludin, Vladimir Klyuev, Anuk Serechetapongse
- May 4, 2015
- IMF Working Papers 2015, 096 (2015)
- Pages: 26
- Volume: 2015
- Issue: 096
- Series: Working Paper No. 2015/096
- ISBN: 9781484362266
- ISSN: 1018-5941
Research question and scope
- Examines determinants of lending rates and interest rate spreads in a panel of six Pacific island countries (PICs).
- Extends prior literature that was largely descriptive or focused on a single country.
Key findings
- Growth has been sluggish in Pacific island countries (PICs); high cost of credit is likely one of the reasons.
- Small scale, geographic dispersion, and vulnerability to shocks increase the cost and risk of credit in this country group.
- There is considerable variability in interest rate spreads both across countries and over time.
- Empirical results are in line with economic theory.
- The size of the economy is negatively correlated with spreads, confirming the importance of scale.
- Inflation appears to have only marginal impact on spreads.
- High loan loss provisions and nonperforming loans increase the cost of credit.
- Banking system concentration increases spreads.
- Higher institutional quality is associated with lower spreads.
Subjects and keywords
- Subjects: Banking, Commercial banks, Deposit rates, Financial institutions, Financial regulation and supervision, Financial services, Income, Loan loss provisions, Loans, National accounts
- Keywords: asset quality, bank assets, bank taxation, banking systems, banks ANZ, capitalized bank, Caribbean, Commercial banks, deposit rate, Deposit rates, Income, interest income, interest rates, lending activity, lending rate, Loan loss provisions, loan market, loan portfolio, Loans, loss provision, market concentration, market power, Pacific island countries, Pacific Islands, PIC bank, WP
Metadata and citation sample
- Format: Chicago
- Sample citation: Fazurin Jamaludin, Vladimir Klyuev, and Anuk Serechetapongse. "What Drives Interest Rate Spreads in Pacific Island Countries? An Empirical Investigation", IMF Working Papers 2015, 096 (2015), accessed 9/15/2026
Source: IMF Working Paper "What Drives Interest Rate Spreads in Pacific Island Countries? An Empirical Investigation" (May 4, 2015).