The Determinants of Bank Interest Margins: Estimates of a Dynamic Model

Massimo Giulidori and Enzo Dia

No 157, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We develop a monopolistic version of a dynamic model of banking, where financial intermediation and payment services play a relevant role. We then empirically test the model using balance-sheet data for large European and US banks, and find strong support for the main predictions of the model. Interest revenues and costs are in fact very persistent, and they are strongly influenced by revenues from fees, and industrial and default costs. Interest margins rise with both short and long-term interest rates; however, when splitting the sample, we find that the results for the impact of interest rates are driven by the European banks. Finally, we find evidence that interest margins are anti-cyclical.

Pages: 28 pages
Date: 2009-03, Revised 2009-03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.dems.unimib.it/repec/pdf/mibwpaper157.pdf First version, 2009 (application/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:mib:wpaper:157

Access Statistics for this paper

More papers in Working Papers from University of Milano-Bicocca, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Matteo Pelagatti ().