- Home
- Publications
- Macroprudential Policy, Monetary Policy And The Bank Interest Rate Margin
Macroprudential Policy, Monetary Policy and the Bank Interest Rate Margin



Downloads
DP-515-5.pdfExternal Authors

Davis, E

Karim, D

Noel, D
Related Themes
Monetary Theory and PolicyJEL Code
E44, E58, G17, G28
Paper Category
Paper Category Number
515
Abstract
Against the background of the policy interest in the interaction of monetary policy and macroprudential policy, we present empirical estimates of effects of macroprudential policies alongside monetary policy on banks’ interest rate margins (net interest income/average assets). This is an important determinant of banks’ profitability and accordingly their ability to accumulate capital, as well as a key aspect of the transmission mechanism of monetary policy. To our knowledge, such an analysis has not been undertaken in the research literature to date. The empirical results for a sample of over 1,300 banks from 15 advanced countries over 2000-13 suggest that the level and difference of interest rates and the yield curve affect the margin, in line with existing work. Meanwhile a number of macroprudential policy measures have an effect on the margin, firstly when they are introduced, secondly in levels and thirdly when leveraged in combination with the level of the interest rate. Some differences are found in the response of small and large banks to macroprudential policy but less so for monetary policy. We contend that these results are of considerable relevance to policymakers and regulators, notably in gauging the overall stance of macroeconomic policy.
Related Blog Posts


How can the Chancellor Mitigate the Impact of Various Shocks in Wednesday’s Spring Statement?
Stephen Millard
Adrian Pabst
4 min read


Related Projects
Related News
-640x360.jpg)
Time to scrap current fiscal rules – and focus on more explicit policy evaluation, NIESR research shows
23 Apr 2021
4 min read

NIESR Press Note: Budget 2021: Today’s triumphs won’t solve tomorrow’s problems
03 Mar 2021
5 min read
Related Publications
Agroforestry Programs in the Colombian Amazon: Selection, Treatment and Exposure Effects on Deforestation
06 May 2022
Discussion Papers
Econometric Analysis of the Determinants of Bank Profitability in Three Major African Counties: Kenya, Nigeria and South Africa
30 Mar 2022
Discussion Papers
The Macro-Economic Effects of UK Aid Returning to 0.7% of GNI
16 Mar 2022
Discussion Papers
Related events

2022 Dow Lecture: The Economy and Policy Trade-Off

Autumn Economic Forum

