Determinants of the financial spread in some South American countries: The role of the economic freedom

Abstract:

The financial intermediation margin is a key variable in the savings and investment decisions of households and firms. In this context, the study aims to estimate the determinants of the financial spread in South American countries during the period 2010-2019; paying special attention to the role of economic freedom. Considering the Prais-Winsten transformation, a sample of 763 commercial banks from eight South American economies (Argentina, Brazil, Colombia, Ecuador, Guyana, Peru, Paraguay and Uruguay) is analyzed. The empirical analysis suggests that the financial spread depends on a set of institution-specific variables, macroeconomic environment factors and economic freedom variables. Specifically, administrative costs, cbkp_redit risk, inflation, the rule of law, and the size of government positively affect the spread; while liquidity, the Herfindahl-Hirschman index and regulatory efficiency have a negative and statistically significant effect. The results are relevant for the control authorities, who must recognize economic freedom as a strategic element in the revitalization of the economy.

Año de publicación:

2022

Keywords:

• commercial banks
• Financial performance
• Index of Economic Freedom
• financial spread
• panel data with corrected standard errors

Fuente:

scopus