The impact of regulatory measures on commercial bank interest rates: A micro analysis of the Barbados case |
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Authors: | Kevin Greenidge Wendell Mcclean |
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Institution: | (1) Central Bank of Barbados and University of the West Indies, West Indies |
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Abstract: | This study estimates the impact on commercial banks' interest-rate behavior of the more pervasive regulatory measures adopted
by the Central Bank of Barbados. The results indicate that the cash ratio, the stipulated government securities ratio, and
the savings deposit rate floor significantly impacted the loan rate for every bank. Generally, the deposit rate for any given
bank has been responsive to fewer policy variables than the loan rate. The loan rates, though generally responsive to all
policy variables other than the bank rate, have exhibited very low elasticities. The results indicated that the ceiling on
the average lending rate, when it existed, depressed loan rates by less than 1 percent on average. This is largely attributable
to the Central Bank's policy of adjusting the ceiling in line with market trends. |
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