Is the financial accelerator story, empirically relevant for the determinants of the interest rate spread?
Juan Carlos Arriaza and
The Quarterly Review of Economics and Finance, 2019, vol. 71, issue C, 37-47
One implication of financial accelerator model, is that leverage of firms should be an important determinant of the interest rate spreads. In this paper we search for empirical evidence of the operation of such accelerator, using a detailed bank supervisory data set from the Guatemalan banking system. Using a Panel-VAR approach, and controlling for the usual determinants of interest rate spreads, we explore if the riskiness of firms and banks can still convey some explanatory power over the interest rate spread, as the financial accelerator hypothesis would suggest. From the ‘loan applicant perspective’, we evaluate the extent to which leverage ratios of firms can explain the spreads between the policy rate and four loan categories. Additionally, we explore the operation of the financial accelerator from the ‘loan granter perspective’, evaluating how much of the spread between different passive interest rates and the policy rate can be explained by a measure of the leverage of banks. Results show the existence of a financial accelerator mechanism operating in the Guatemalan banking system, from the loan applicant perspective. From the loan granter perspective, evidence seems weak, but sensible.
Keywords: Interest rate spreads; Financial accelerator model; Business fluctuations (search for similar items in EconPapers)
JEL-codes: E32 E44 E51 G21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:71:y:2019:i:c:p:37-47
Access Statistics for this article
The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty
More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().