Financial intermediation, monetary uncertainty, and bank interest margins

• Leonardo F. Hernández ^[1]
  1. [1] Universidad Católica de Chile.
• Localización: Revista de análisis económico, ISSN-e 0718-8870, ISSN 0716-5927, Vol. 7, Nº 2, 1992, págs. 23-42
• Idioma: inglés
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• Resumen

  • This paper studies a simple model of financial intermediation in order to understand how the lending-borrowing spread or interest margin) charged by financial intermediaries is determined in equilibrium in a monetary economy. The main conclusion of the paper concerns the effect on the spread of changes in the distribution of monetary innovations. Thus, changes in the monetary-policy-rule followed by the Central Bank which alter the volatility of inflation will have important effects on the interest margin and also on the amount of credit available to investors. A crosssection empirical analysis strongly supports our hypothesis