Determinants of Interest Margins in Colombia

Dairo Estrada (), Esteban Gómez () and Inés Orozco ()

No 2335, Borradores de Economia from Banco de la Republica

Abstract: This paper analyzes the determinants of interest margins in the Colombian Financial System. Based on the model by Ho and Saunders (1981), interest margins are modelled as a function of the pure spread and bank-specific institutional imperfections using quarterly data for the period 1994:IV-2005:III. Additionally, the pure spread is estimated as a function of market power and interest rate volatility. Results indicate that interest margins are mainly affected by credit institutions' inefficiency and to a lesser extent by credit risk exposure and market power. This implies that public policies should be oriented towards creating the necessary market conditions for banks to enhance their efficiency.

Keywords: Interest margins; competition; credit risk; interest rate risk (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 32
Date: 2006-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.banrep.gov.co/docum/ftp/borra393.pdf

Related works:
Working Paper: Determinants of Interest Margins in Colombia (2006)
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:col:000094:002335

Access Statistics for this paper

More papers in Borradores de Economia from Banco de la Republica
Bibliographic data for series maintained by Clorith Angelica Bahos Olivera ().