Determinants of Interest Margins in Colombia

Dairo Estrada (), Esteban Gómez () and Inés Orozco ()

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper analyzes the determinants of interest margins in the Colombian Financial System. Based on the model by Ho and Saun- ders (1981), interest margins are modelled as a function of the pure spread and bank-speci¯c institutional imperfections using quarterly data for the period 1994:IV-2005:III. Additionally, the pure spread is estimated as a function of market power and interest rate volatility. Results indicate that interest margins are mainly a®ected by credit institutions' ine±ciency and to a lesser extent by credit risk exposure and market power. This implies that public policies should be ori- ented towards creating the necessary market conditions for banks to enhance their e±ciency.

Keywords: Interest Margins; Competition; Credit Risk; Interest Rate Risk. (search for similar items in EconPapers)
JEL-codes: G21 G28 L11 L41 L89 (search for similar items in EconPapers)
Date: 2006-04
New Economics Papers: this item is included in nep-cba, nep-com, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://doi.org/10.32468/be.393 (application/pdf)

Related works:
Working Paper: Determinants of Interest Margins in Colombia (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:393

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