Texto para discussão 14/2007

Macroeconomic determinants of bank spread in Brazil: an empirical evaluation
Guilherme Jonas Costa da Silva*, José Luís Oreiro**, Luiz Fernando de Paula***

Abstract
Despite a decline in interest rates since mid-1999, bank spread in Brazil continues extremely high in international terms and in recent years has stood at around 40%. This paper analyses the determinants of bank spread in Brazil, seeking particularly to analyse the macroeconomic determinants of spread in recent times. It uses a VAR model to identify the macroeconomic variables that may directly or indirectly have been influencing spread in Brazil over the period 1994-2005. It presents evidence that interest rate levels and, to a lesser degree, the inflation rate are the main macroeconomic determinants of high bank spread in Brazil.

Keywords: Bank Spread, VAR models, Brazilian banking sector.

JEL: E43, E44, G21

* Postgraduate in economics at Centro de Desenvolvimento e Planejamento Regional at Universidade Federal de Minas Gerais (CEDEPLAR/UFMG).
** Professor of economics at Universidade Federal do Paraná (UFPR), and researcher at Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq).
*** Professor of economics at Universidade Federal do Rio de Janeiro (UFRJ), and researcher at Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq).

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