BEHAVIORAL ECONOMICS IN BANKING: BEHAVIORAL FACTORS AS DETERMINANTS OF THE INTEREST RATE SPREAD

Andrey Gurov (), Milena Nikolova () and Elena Stoyanova ()
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Andrey Gurov: American University in Bulgaria, Bulgaria
Milena Nikolova: American University in Bulgaria, Bulgaria
Elena Stoyanova: American University in Bulgaria, Bulgaria

Eurasian Journal of Economics and Finance, 2018, vol. 6, issue 3, 72-82

Abstract: The paper discusses behavioral factors that affect banks’ clients and examines empirically their influence on banks’ interest rate spreads. We devise a model that combines macroeconomic variables, which have been considered in earlier works, along with variables that indicate behavioral patterns, combined in a single index. Empirical results show that the constructed behavioral index has positive effect on banks’ interest rate spread, suggesting that patterns of customer behavior related to making less rational choices enable banks to extract higher spreads.

Keywords: Interest Rate Spread; Behavioral Economics; Banking (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ejn:ejefjr:v:6:y:2018:i:3:p:72-82

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