# **Table 3: Main drivers of nominal lending interest rates and lending-deposit spread**

Econometric Results

## Panel A. Dependent variable: Nominal lending interest rate

||||||||Nominal le|nding inter|est rate|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|VARIABLES|(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|(10)|(11)|(12)|(13)|(14)|(15)|
|Inflation (%)|0.077***|0.074***|0.077***|0.081***|0.114***|0.111***|0.110***|0.140***|0.148***|0.142***|0.115***|0.116***|0.142***|0.066*|0.070**|
||(4.635)|(4.231)|(4.259)|(4.448)|(5.215)|(4.937)|(4.569)|(5.830)|(5.701)|(5.456)|(4.347)|(4.385)|(5.426)|(1.800)|(2.007)|
|St. Deviation Inflation (%)<br>ons||0.050**|0.047**|0.299***|0.377***|0.392***|0.403***|0.217***|0.213***|0.219***|0.201***|0.208***|0.216***|0.123**|0.093|
|diti||(2.131)|(1.994)|(6.827)|(7.249)|(7.504)|(7.417)|(4.404)|(4.057)|(4.153)|(3.583)|(3.720)|(4.097)|(1.993)|(1.599)|
|Public Debt (%GDP)<br>on|||0.014**|0.014**|0.017**|0.019**|0.043***|0.013|0.040***|0.040***|0.040**|0.043***|0.040***|0.032*|0.037**|
|al c|||(2.157)|(2.138)|(2.219)|(2.449)|(3.738)|(1.024)|(2.967)|(2.930)|(2.520)|(2.684)|(2.943)|(1.756)|(2.325)|
|GDP percapita<br>fisc||||0.000|-0.001**|-0.001**|-0.001**|-0.001***|-0.000|-0.000|-0.000|0.000|-0.000|-0.000|-0.000**|
|ro-||||(0.451)|(-2.339)|(-2.513)|(-2.570)|(-3.751)|(-1.588)|(-1.526)|(-0.143)|(0.162)|(-1.396)|(-0.331)|(-2.051)|
|Total Savings (%GDP)<br>Mac|||||0.019|0.022|0.044*|0.016|0.032|0.036|0.031|0.032|0.036|||
||||||(1.161)|(1.326)|(1.852)|(0.729)|(1.384)|(1.529)|(1.237)|(1.271)|(1.534)|||
|Policy/money market rate (%)||||||||||||||0.191***|0.205***|
|||||||||||||||(4.335)|(4.859)|
|Overhead costs (%Total Assets)||||||0.093|0.189**|0.214***|0.431***|0.432***|0.439***|0.416***|0.425***|0.173|0.244**|
|||||||(1.151)|(1.998)|(2.698)|(4.771)|(4.727)|(4.428)|(4.174)|(4.628)|(1.436)|(2.126)|
|Three bank concentration (% Total<br>bank system assets)<br>ristics|||||||0.001|0.016|0.029**|0.032**|0.024|0.018|0.031**|0.012|0.026*|
|<br> <br>acte|||||||(0.079)|(1.240)|(2.163)|(2.323)|(1.602)|(1.232)|(2.267)|(0.744)|(1.659)|
|Non-performing loans (% Total<br>Gross Loans)<br>char||||||||0.095**|0.087**|0.083**|0.121***|0.120***|0.084**|0.083|0.051|
|<br> <br>ctor||||||||(2.584)|(2.296)|(2.183)|(2.626)|(2.595)|(2.209)|(1.618)|(1.135)|
|Non-interest income (% Total<br>Income)<br>ing se|||||||||-0.033***|-0.034***|-0.033***|-0.033***|-0.033***|-0.024*|-0.023*|
|ank|||||||||(-3.435)|(-3.433)|(-2.981)|(-2.961)|(-3.382)|(-1.883)|(-1.901)|
|Private credit (% GDP)<br>B||||||||||0.005|0.029|0.029|0.007|0.034*|0.014|
|||||||||||(0.295)|(1.460)|(1.484)|(0.419)|(1.706)|(0.764)|
|Credit Bureau Coverage (% adults)<br>nt|||||||||||-0.011|-0.011*||-0.015*||
|nme|||||||||||(-1.380)|(-1.692)||(-1.809)||
|Time to resolve insolvency (years)<br>viro||||||||||||0.443**||0.473***||
|ss en||||||||||||(2.405)||(2.623)||
|Rule of Law (Kaufmann et al.,2010)<br>sine|||||||||||||-0.643||-1.327|
|Bu|||||||||||||(-0.737)||(-1.272)|
|Constant|12.403***|12.330***|11.623***|11.073***|14.001***|13.783***|11.796***|12.171***|7.432***|7.124***|5.410***|3.989***|6.771***|6.438***|8.995***|
||(178.574)|(164.356)|(87.859)|(53.230)|(24.620)|(22.630)|(16.838)|(15.997)|(9.123)|(8.376)|(5.914)|(4.200)|(7.561)|(5.320)|(8.685)|
|Observations|1,404|1,313|1,262|1,255|1,058|1,021|935|654|651|650|575|572|650|445|491|
|Number of country_code_|109|103|102|101|94|92|84|64|64|64|63|62|64|50|51|

Note: Annual information between 2005 and 2017 for 51 EMDE countries. _Public debt_ includes debt data for general government. In case this data is not available, debt data for the central government is used. _Policy rate_ is the Central Bank or Monetary Authority’s benchmark interest rate for monetary policy. In case that policy rate is not available, money market rate is used. Panel data regressions with first-order error structure to adjust for serial autocorrelation. Country-fixed effects included. Dummy variable capturing Global Financial Crisis period included. t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 42