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

Dia, E., Giulidori, M. (2009). The Determinants of Bank Interest Margins: Estimates of a Dynamic Model [Working paper del dipartimento].

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

DIA, ENZO;
2009

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
Working paper del dipartimento
Bank interests margins; Dynamic model
English
mar-2009
Dia, E., Giulidori, M. (2009). The Determinants of Bank Interest Margins: Estimates of a Dynamic Model [Working paper del dipartimento].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/23194
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