On the dynamics of lending and deposit interest rates in emerging markets: a non-linear approach

Ana Iregui, Costas Milas and Jesus Otero

No 3297, Borradores de Investigación from Universidad del Rosario

Abstract: This paper studies the dynamics of lending and deposit rates in four emerging markets in Latin America: Argentina, Chile, Colombia and Mexico. The dynamics of interest rates exhibit a regime-switching behavior, where the transition from one regime to the other is controlled by the interest rate spread difference. The first regime, which is characterized by negative deviations of the interest rate spread relative to an estimated threshold, occurs during periods of financial liberalization. The second regime, which is characterized by positive deviations of the interest rate spread relative to the estimated threshold, occurs during periods of financial inefficiency and increasing government intervention. By capturing changing policy regimes from government intervention to a more financially liberalized environment and vice versa, the non-linear specification proves superior to the linear one. ********************************************************************** Este trabajo estudia el comportamiento dinámico de las tasas de interés de captación y colocación en cuatro mercados emergentes en Latinoamérica: Argentina, Chile, Colombia y México. La dinámica de las tasas de interés muestra un comportamiento de cambio de régimen, donde la transición de un régimen a otro, es controlada por el diferencial entre las tasas. El primer régimen, caracterizado por desviaciones negativas del diferencial entre las tasas con respecto a un umbral estimado, ocurre durante periodos de liberalización financiera. El segundo, caracterizado por desviaciones positivas, ocurre durante periodos de ineficiencia financiera y creciente intervención. La especificación no lineal resulta mejor que la lineal en la medida en que permite capturar cambios de régimen.

Keywords: Interest rates; Spreads; Emerging markets, Non-linear models, Regimes (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 E43 O54 (search for similar items in EconPapers)
Pages: 39
Date: 2001-11-02
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http://repository.urosario.edu.co/bitstream/handle/10336/10874/3297.pdf

Related works:
Journal Article: On The Dynamics Of Lending And Deposit Interest Rates In Emerging Markets: A Non-Linear Approach (2002)
Working Paper: On the dynamics of lending and deposit interest rates in emerging markets:a non-linear approach (2002)
Working Paper: On the dynamics of lending and deposit interest rates in emerging markets:a non-linear approach (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000091:003297

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