War and peace times, interest margin and commercial bank operations: A case of the Sri Lankan banking sector

Lalith Seelanatha and Ranjith Ihalanayake

International Journal of Development and Conflict, 2019, vol. 9, issue 2, 122-141

Abstract: The civil war in Sri Lanka, which lasted over 30 years, concluded in 2009. As well as causing enormous pain and disruption to everyday life, the war had a lasting impact on socio-economic and political activities in Sri Lanka. It deprived Sri Lankans of many opportunities, and thus hindered the true potential of economic development in the island nation. The conclusion of the war has added a new dimension to Sri Lankan society; Sri Lanka has embarked on an ambitious journey of economic expansion to regain wartime losses.Against this background, this paper analyses the impact of the civil war on the operations of the financial services sector, with specific reference to the commercial banking industry in Sri Lanka. It uses a longitudinal graphical analysis coupled with panel data regression. The former is used to understand banking operations during peacetime and wartime, while the latter is used to analyse the impact of the civil war on the net interest margin (NIM) and interest rate spread between lending and deposit rates of commercial banks. The results reveal that the civil war has significantly undermined the development of the commercial banking industry and its economic performance and widened the interest rate spread. Moreover, the results confirm that the conclusion of civil war has brought some relief to the economy, with commercial banks able to reduce the NIM.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.ijdc.org.in/uploads/1/7/5/7/17570463/seelanatha_paper_1.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gok:ijdcv1:v:9:y:2019:i:2:p:122-141

Ordering information: This journal article can be ordered from
http://www.ijdc.org.in/issues.html

Access Statistics for this article

International Journal of Development and Conflict is currently edited by Partha Gangopadhyay

More articles in International Journal of Development and Conflict from Gokhale Institute of Politics and Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().