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Low-for-Long Interest Rates and Net Interest Margins of Banks in Advanced Foreign Economies

Stijn Claessens (), Nicholas Coleman () and Michael S. Donnelly

No 2016-04-11-1, IFDP Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This note explores the empirical evidence between changes in interest rates and NIMs for different interest rate environments to discover the potential adverse effects of a low interest rate on bank NIMs. Using cross-country evidence can be insightful to assess a situation that is not so common in any individual country. Overall, the new empirical analysis shows that low rates are contributing to weaker NIMs and identifies an adverse effect that is materially larger when interest rates are low. It suggests that these effects can be material for banks in some key advanced foreign economies (AFEs).

Date: 2016-04-11
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DOI: 10.17016/2573-2129.20

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