The determinants of interest rate spreads in dollarized economies

Julian Diaz and Juan Francisco Rumbea Pavisic

Applied Economics Letters, 2023, vol. 30, issue 17, 2473-2480

Abstract: Twenty years after dollarizing, interest rate spreads remain considerably high in El Salvador and even higher in Ecuador, despite decreased deposit rates. Using panels covering the 2005–2019 period, we explore the determinants of interest rate spreads in these two dollarized countries. We find that bank-specific characteristics, such as market share and liquidity, play a significant role at accounting for the differences in spreads. Dollarization is also expected to promote the entry of international banks due to the elimination of depreciation risk. We find that the low degree of foreign bank participation in Ecuador also contributes to explaining spread differences. These findings point out to complementary reforms to extract the full benefits of dollarization.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2022.2098234 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:30:y:2023:i:17:p:2473-2480

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2022.2098234

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().