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Determinants of Lending Rates and Interest Rate Spreads in Macedonia

Author

Listed:
  • Ljupka Georgievska

    (National Bank of the Republic of Macedonia)

  • Rilind Kabashi

    (National Bank of the Republic of Macedonia)

  • Nora Manova - Trajkovska

    (National Bank of the Republic of Macedonia)

  • Ana Mitreska

    (National Bank of the Republic of Macedonia)

  • Mihajlo Vaskov

    (National Bank of the Republic of Macedonia)

Abstract

This paper focuses on investigating the determinants of lending rates and interest rate spreads in Macedonia. In order to quantify the effect of various factors on lending rates and interest rate spreads during the 2001-2009 period, we use panel estimation techniques on a sample of commercial banks in Macedonia. Our results indicate that lending rates are mostly influenced by bank size and market share, and to a somewhat lesser extent by deposit rates and non-performing loans. In addition, policy variables such as the domestic policy rate and the foreign interest rate also appear to be quite important. Furthermore, bank size and market share, as well as the differential between domestic and foreign rates, are the most important factors affecting interest rate spreads, while the effect of other factors is less clear-cut.

Suggested Citation

  • Ljupka Georgievska & Rilind Kabashi & Nora Manova - Trajkovska & Ana Mitreska & Mihajlo Vaskov, 2010. "Determinants of Lending Rates and Interest Rate Spreads in Macedonia," Working Papers 2010-03, National Bank of the Republic of North Macedonia.
    • Handle: RePEc:mae:wpaper:2010-03
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    Citations

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    Cited by:

    1. Ramona Busch & Christoph Memmel, 2016. "Quantifying the components of the banks’ net interest margin," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(4), pages 371-396, November.
    2. Ali Zulfiqar & Bashir Zahid & Arshad Muhammad Usman & Ghazali Ahmed & Asif Muhammad & Khan Fahad Najeeb, 2016. "Analysis of Some Inner Factors Affecting the Lending Rate and Commercial Bank Behavior: (An Empirical Study Based on the Commercial Banking Sector of Pakistan)," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 12(4), pages 111-119, December.
    3. Brunilda NELI, 2015. "Macroeconomic And Market Determinants Of Interest Rate Spread: Evidence From Albania," Scientific Bulletin - Economic Sciences, University of Pitesti, vol. 14(3), pages 51-59.
    4. Arezoo GHASEMI, & Malihe ROSTAMI, 2016. "Determinants Of Interest Rate Spread In Banking Industry," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(1), pages 1-46, January.

    More about this item

    Keywords

    interest rates; banking system; panel estimation; Macedonia;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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