Bank Lending Rates and Spreads in Emdes [electronic resource] : Evolution, Drivers, and Policies / Erik Feyen.

Feyen, Erik.
Washington, D.C. : The World Bank, 2020.
Government document
1 online resource (53 p.)
Policy research working papers
World Bank e-Library

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World Bank working papers.
Local subjects:
Capital Markets and Capital Flows. (search)
Emerging Market Economies. (search)
Finance and Financial Sector Development. (search)
Inflation. (search)
Interest Spread. (search)
Lending Rates. (search)
Macroeconomics and Economic Growth. (search)
Spreads. (search)
This paper analyzes the main trends and patterns of nominal lending interest rates and lending-deposit interest rate spreads in emerging markets and developing economies. Using data from 140 emerging markets and developing economies, analysis shows that nominal lending rates and spreads declined between 2003 and 2017, with regional heterogeneity. In addition, it finds that less economically and financially developed countries tend to exhibit higher lending rates and spreads. These higher rates tend to be driven by higher spreads, not deposit interest rates. Also, illustrative regressions suggest that relevant correlates of nominal lending rates include inflation, public debt, and policy interest rate (macro-fiscal conditions); overhead costs, nonperforming loans, and non-interest income (banking characteristics); and credit bureau coverage and time to resolve insolvency (business environment). Finally, illustrative decompositions of the level and 10-year change between 2007 and 2017 of nominal lending rates find relative differences across regions. On the decline of nominal interest rates in that decade, rising public debt and nonperforming loans have pushed rates up, which was counterbalanced by a reduction in inflation, the policy interest rate, and overhead costs and a better business environment. Since the global financial crisis, a common global factor has increased in importance and has contributed to the downward trend in nominal lending rates.
Zuccardi Huertas, Igor.
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Print Version: Feyen, Erik Bank Lending Rates and Spreads in Emdes: Evolution, Drivers, and Policies
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