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The Determinants of Bank Interest Spread in Brazil

Author

Listed:
  • Tarsila Segalla Afanasieff

    (Banco Central do Brasil)

  • Priscilla Maria Villa Lhacer

    (Banco Central do Brasil)

  • Márcio I. Nakane

    (Banco Central do Brasil)

Abstract

The behavior of bank interest spreads in Brazil reveal two stylized facts. First, a remarkable fall in the average rates since early 1999. Second, a strong and persistent dispersion of rates across banks. Such stylized facts suggest that both the time series and the cross section dimensions are important elements to understand the trend of the bank interest spread in the country. This paper makes use of panel data techniques to uncover the main determinants of the bank interest spreads in Brazil. A question that the paper aims to address is whether macro or microeconomic factors are the most relevant ones affecting the behavior of such rates. A two-step approach due to Ho and Saunders (1981) is employed to measure the relative relevance of the micro and the macro elements. The roles played by the inflation rate; risk premium, economic activity, required reserves (all macroeconomic factors) and CAMEL-type indicators (microeconomic factors) are highlighted. The results suggest that macroeconomic variables are the most relevant factors to explain the behavior of bank interest spread in Brazil.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tarsila Segalla Afanasieff & Priscilla Maria Villa Lhacer & Márcio I. Nakane, 2002. "The Determinants of Bank Interest Spread in Brazil," Money Affairs, CEMLA, vol. 0(2), pages 183-207, July-Dece.
    • Handle: RePEc:cml:moneya:v:xv:y:2002:i:2:p:183-207
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    References listed on IDEAS

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