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Why So High? Understanding Interest Rate Spreads in Latin America

  • 280 Pages
  • 0.97 MB
  • 988 Downloads
  • English

Inter-American Development Bank
Banks and banking, Business/Economics, Interest rates, Latin Am
ContributionsInter-American Development Bank (Corporate Author, Editor), Philip Lawton Brock (Editor), Lilana Rojas-Suarez (Editor)
The Physical Object
FormatPaperback
ID Numbers
Open LibraryOL8707199M
ISBN 101886938741
ISBN 139781886938748

Interest rate spreads in Latin America: facts, theories, and policy recommendations --Spreads in the Argentine financial system --Determinants of bank spreads in Bolivia --Macroeconomic influences on bank spreads in Chile, --Structural reform and bank spreads in the Colombian banking system --The determinants of bank interest rate.

However, the persistence of high interest rate spreads - the difference between the interest charged to borrowers and the rate paid to depositors - has been a disquieting outcome of the reforms.

Why So High. presents the first systematic analysis of the micro-and macroeconomic determinants of bank spreads across countries in Latin by: 7. Find helpful customer reviews and review ratings for Why So High.

Understanding Interest Rate Spreads in Latin America at Read honest and unbiased product reviews from our users.5/5. Brock, Philip Lawton., and Liliana Rojas-Suárez. Why so High?: Understanding Interest Rate Spreads in Latin America. Washington, DC: Inter-American Development Bank.

The Economics Department main office has moved online and staff will be teleworking starting on Ma Please email [email protected] for general information. For undergraduate students needing advising, please email [email protected] will take place over email, and/or other platforms (such as Zoom) as necessary.

Liliana Rojas-Suarez is a Peruvian economist, who is currently a Senior Fellow and Director of the Latin American Initiative at the Center for Global Development. She is also Core Faculty for the Program in Economic Policy Management at School of International and Public Affairs, Columbia University and the President of the Latin American Committee on Macroeconomic and Financial Issues (CLAAF).Alma mater: Western University.

Downloadable (with restrictions). Using international comparisons and a unique bank-level dataset on the Ugandan banking system over the period towe explore the factors behind consistently high interest rate spreads and margins.

International comparisons show that the small size of Ugandan banks, persistently high T-Bill rates and institutional deficiencies explain large. Nevertheless, the persistence of high interest rate spreads has been a disquieting outcome of the reforms. This paper explores the determinants of bank spreads in a systematic way for Argentina, Bolivia, Chile, Colombia, Mexico, Peru, and Uruguay during the by:   Another Latin American economy that will be affected by higher U.S.

interest rates is Mexico's. "Without a doubt, the Mexican economy would experience financial volatility whenever the. Complete Report in English Official version of document (may contain signatures, etc) Official PDF, 37 pages mb TXT *Cited by: 5.

A 'read' is counted each time someone views a publication summary (such as the title, abstract, and list of authors), clicks on a figure, or views or downloads the full-text. Banking Spreads in Latin America Prepared by R. Gaston Gelos1 Intermediation spreads in Latin America are high compared to those in other banking markets.

This is true when measuring spreads either as The results suggest that Latin America has higher interest rate. Understanding Investing Interest Rate Swaps.

Interest rate swaps have become an integral part of the fixed income market.

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These derivative contracts, which typically exchange – or swap – fixed-rate interest payments for floating-rate interest payments, are an essential tool for investors who use them in an effort to hedge, speculate, and manage risk.

Basch, Michael and J. Rodrigo Fuentes (). “Macroeconomic Influences on Bank Spreads in Chile, –” In Philip Brock and Liliana Rojas-Suarez (editors), Why So High. Understanding Interest Rate Spreads in Latin America, Inter-American Bank for Development, Chapter 4.

Fuentes, J. Rodrigo ().File Size: KB. of the relationship between interest rates and credit spreads.

Details Why So High? Understanding Interest Rate Spreads in Latin America EPUB

Section III explores the validity of two additional possible explanations for the negative relation, and section IV concludes. 1 King () estimates that the call option value only makes up about two File Size: KB.

Again, we don’t see any support for the hypothesis that spreads systematically rise with interest rates. Depending on the period and on whether you look at levels or changes, you can see a slightly stronger relationship of the Federal Funds rate with either bank lending rates of funding costs; but none of these differences would pass a standard significance test.

Intermediation spreads in Latin America are high by international standards. This paper examines the determinants of bank interest margins in that region using bank and country-level data from 85 countries, including 14 Latin American economies.

The results suggest that Latin America has higher interest rates, less efficient banks, and larger reserve requirements than other regions and that Cited by: The amount by which the interest earned by an investment exceeds or fails to exceed its own interest liability.

If a bank pays depositors one interest rate, and lends the deposited money out at a higher interest rate, the difference between those two interest rates is the interest rate spread.

So long as inflation is over 8%, Brazil's Central Bank will continue to raise interest rates. It doesn't interest monetary authorities that other emerging markets -- namely China -- are using Author: Kenneth Rapoza.

Her most recent publications include: Why So High. Understanding Interest Rate Spreads in Latin America (ed. With P. Brock, IDB, ), "What Exchange Rate Arrangements Work Best for Latin America", World Economic Affairs (Autumn ) and Financial Regulation: Why, How and Where Now.

(With C. Gooddhart et al, Routledge, ). Release: Interest Rate Spreads, 36 economic data series, FRED: Download, graph, and track economic data. Junk obligations, which tend to have shorter maturities than high-grade debt, have stronger cushions for interest-rate risk and, as such, have typically outperformed when Treasury yields have.

This column last week discussed the issue of real interest rate and the interest rate spread. Following that discussion, a lot of readers wanted to know why Malawians should bother about interest rate spreads.

What is the relevance to their day to day banking and investment decisions.

Description Why So High? Understanding Interest Rate Spreads in Latin America EPUB

To answer these questions, it is important to. Policy Interest Rates in Latin America: Moving to Neutral. Many Latin American countries have strengthened their monetary policy frameworks in recent years to keep the rate of inflation in check.

Some of them have adopted an inflation target and use the policy interest rate as the main tool to achieve that target. The subject of interest rate spread (IRS), defined as the difference between average interest ra te earned on interest ear n-ing assets (loans) and average interest rate paid on deposits, has * The authors are grateful to two anonymous referees of this journal for their con-structive criticisms and suggestions on an earlier version of the by:   Interest rates and credit spreads.

Interest rates for different types of bonds normally don’t change by the same degree together. When there’s a lot of uncertainty in the market, investors.

8 Basel Committee on Banking Supervision, Interest rate risk in the banking book: consultative document, Junepp 7–8. 4 FSI Occasional Paper No 12 interest rates, a bank that has a long fixed rate loan and a short floating rate deposit will. Interest Rate Spread Interest rate spread is defined by market microstructure characteristics of the banking sector and the policy environment (Ngugi, ).

Risk-averse banks operate with a smaller spread than risk-neutral banks since risk aversion raises the bank’s optimal interest rate and reduces the amount of credit supplied. Hi, We are organizing a great workshop on " AML/BSA Boot Camp" on 17 October - Tuesday, 18 October This is a course by Dr.

Gina J. Lowdermilk - President and CEO, Platinum Endeavors LLC Dr. Gina J. Lowdermilk, PhD (ABD), CAMS, CRMS is a. Brock, P.L. and Suarez, L.R. () Understanding the Behavior of Bank Spreads in Latin America. Journal of Development Economics, 63. First let us understand the basic relationship between ‘supply’ and ‘price’ of the goods.

Consider this case- Raju was one careless guy. He always wasted water and never thought of conserving it when there was abundant supply of water. However, in.

This could also become inflationary and so the Fed is very likely to respond to a high rate of inflation by raising interest rates. Therefore, the Fed responds to the state of the economy. The key point here is that it is the state of the economy which determines how markets and the Fed set rates.Understanding Investing Corporate Bonds.

After government bonds, the corporate bond market is the largest section of the global bond universe. With a vast array of maturities, yields and credit quality available, investing in corporate bonds has the potential to provide higher yields than government bonds and diversification benefits for investors.