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The Determinants of Bank Interest Rate Margins in the Colombian Housing Credit Market

Durán-Vanegas, Juan David (2016): The Determinants of Bank Interest Rate Margins in the Colombian Housing Credit Market.

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Abstract

This paper analyses the determinants of banking mortgage loan interest rate margins in the Colombian mortgage credit market focusing on the effects of market concentration and using a panel-econometric approach for the period Jan-2003 to Dic-2014. Results imply that interest rate margins are mainly explained by the volatility of long-run interest market rates and negatively associated to the level of market concentration. These findings are consistent with a modified version of the efficient-structure hypothesis which suggests that differences in efficiency create unequal market shares and allow firms to set lower prices. Further evidence is presented by the existence of a long-term relationship between mortgage interest rates and market concentration during the sample period.

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