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High interest rates, spreads, and the costs of intermediation : two studies (English)

High interest rates have become a global concern in both the industrialized and developing countries. In some developing countries they have reached real levels far above even the unprecedented rates prevailing in international capital markets. Such rates prejudice investment and clearly require attention if growth is to be resumed during adjustment. The two papers in this volume analyze some of the causes of high real rates and suggest some policy options for bringing rates down. The first paper summarizes the Industry Department's ongoing work on high real rates while the second paper presents perhaps the first cross-country analysis of banking costs and profits in developing countries. The papers conclude that reductions in direct taxes and in reserve requirements and forced investments could reduce the gap between deposit and lending rates dramatically, and thus lower real lending rates sharply.

Details

  • Author

    Hanson, James A, de Rezende Rocha, Roberto

  • Document Date

    1986/10/31

  • Document Type

    Publication

  • Report Number

    IAF18

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    1999/08/15

  • Disclosure Status

    Disclosed

  • Doc Name

    High interest rates, spreads, and the costs of intermediation : two studies

  • Keywords

    reserve requirement;lending rate;profit before tax;financial system;inflation;deposit rate;public sector deficit;interest rate on deposit;high real interest rate;financial intermediation;Tax on Financial Transactions;inflation across country;deposits with interest rate;Economic Rate of Retum;alternative source of revenue;real rate of return;profit rate;high reserve requirement;domestic resource mobilization;real deposit rates;commercial bank;overvalued exchange rate;balance of payment;domestic commercial bank;economies of scale;capital flight;implicit tax;Financial Sector;certificate of deposit;average interest rate;reduction of taxes;low cost loan;competition for deposit;loss of confidence;supply of deposit;demand for credit;income statement;branch network;banking system;volume of transaction;cost of credit;real treasury bill;international capital market;allocation of resource;restrictions on loan;domestic financial market;incentive for bank;liberalization of interest;foreign exchange risk;misallocation of resources;private commercial bank;interest paying deposit;lending interest rate;foreign capital inflow;degree of competition;commercial paper market;freeing interest rate;impact of tax;domestic banking system;impact of policy;interest rate liberalization;lack of competition;liberalizing interest rate;international capital movement;domestic financial assets;foreign currency deposit;domestic financial system;public sector bond;deposit interest rate;commercial banking system;taxes on domestic;public sector budget;

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Citation

Hanson, James A de Rezende Rocha, Roberto

High interest rates, spreads, and the costs of intermediation : two studies (English). Industry and finance series ; no. IAF 18 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/123311468140381799/High-interest-rates-spreads-and-the-costs-of-intermediation-two-studies