 Interest rate spreads: Different stories for different types of loanMerike Kukk and Natalia Levenko Research in International Business and Finance, 2024, vol. 72, issue PA Abstract: The paper studies the determinants of the interest rate spreads in Estonia, a country that stands out among European countries for its wide spreads and highly concentrated banking sector. Four distinct credit markets are considered for housing loans, consumer loans, long-term corporate loans and short-term corporate loans. The paper uses quarterly panel data from 2000Q1–2021Q1. It uses a two-stage approach to disaggregate the observed spread into a component determined by the bank-specific factors and a component determined by the market-specific factors, which is called pure spread. For each of the two components, we find substantial differences in the determinants of the spreads across different types of loan. While credit risk is important for long-term corporate and housing loans, inverse efficiency is significant in the segment of short-term loans. The contribution of market concentration to the pure spread is larger for household loans than for corporate loans. Keywords: Interest rate spreads; Interest rate margins; Banking sector; Housing loans; Consumer loans; Corporate loans; Market concentration (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:72:y:2024:i:pa:s0275531924003179 DOI: 10.1016/j.ribaf.2024.102524 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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