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Capital account liberalization and commercial bank interest rate margins

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  • Winston Ricardo Moore

Abstract

A large body of literature exists on the potential impact that capital account liberalization has had on uncovered interest rate parity. However, it can also have important effects on domestic bank spreads by providing economies of scale and scope and increasing competitive pressures. This article provides an investigation of how capital account liberalization has affected the interest rate margins of the domestic banking markets in 112 countries. The study finds that contrary to a priori reasoning, opening a country's capital account has little or no impact on interest rate spreads obtained by the banking industries in the study. These results are robust to various changes in model specification and estimation approach.

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  • Winston Ricardo Moore, 2010. "Capital account liberalization and commercial bank interest rate margins," Applied Financial Economics, Taylor & Francis Journals, vol. 20(21), pages 1673-1685.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:21:p:1673-1685
    DOI: 10.1080/09603107.2010.524617
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    References listed on IDEAS

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    Cited by:

    1. Gilbert Cette & Rémy Lecat & Ahmed Ould Ahmed Jiddou, 2016. "Margin rate and the cycle: the role of trade openness," Applied Economics, Taylor & Francis Journals, vol. 48(37), pages 3569-3575, August.

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