Determinants of Interest Rate Spreads in Solomon Islands

Author/Editor:

Nooman Rebei

Publication Date:

June 12, 2014

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 2014/105

Subject:

Bank credit Banking Commercial banks Financial institutions Income Inflation Legal support in revenue administration Loans National accounts Personal income Prices Revenue administration

English

Publication Date:

June 12, 2014

ISBN/ISSN:

9781498303651/1018-5941

Stock No:

WPIEA2014105

Pages:

24

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