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Ljupka Georgievska

Rilind Kabashi

Nora Manova-Trajkovska

Ana Mitreska

Mihajlo Vaskov


National Bank of the Republic of Macedonia



This paper focuses on investigating the determinants of lending rates and interest rate spreads. In order to quantify the effect of various factors on lending rates and interest rate spreads during the last decade, we use panel estimation techniques on a sample of domestic commercial banks. Our results indicate that lending rates are mostly influenced by bank size and market share and to a lesser extent by deposit rates and non-performing loans. In addition, policy variables such as the domestic policy rate and the foreign interest rate also appear to be quite important. Furthermore, the bank size and the market share, as well as the differential between domestic and foreign rates, are the most important factors affecting interest rate spreads, while the effect of other factors is less clear-cut.


JEL Classification: C23, E43, G21

Keywords: interest rates, banking system, panel estimation



Acknowlegdements: The research was carried out with Leo de Haan, an expert from the De Nederlandsche Bank, as part of the technical aid for panel estimation techniques in 2008. The authors are thankful to Sultanija Bojceva-Terzijan of the National Bank of the Republic of Macedonia for her very useful comments and suggestions, as well as to Heather Gibson of the Bank of Greece for her comments on an earlier draft of this paper presented in the 3rd South-Eastern European Research Workshop, held in Athens on 19-21 November, 2009. The remaining errors belong to the authors. Comments and suggestions for improvement are welcome. The opinions and the views in this study are those of the authors and do not necessarily reflect those of the National Bank of the Republic of Macedonia and the Bank of Greece.




Ljupka Georgievska, georgievskal@nbrm.gov.mk, +389 2 3108 155

Rilind Kabashi, kabashir@nbrm.gov.mk, +389 2 3108 200

Nora Manova – Trajkovska, manovan@nbrm.gov.mk, +389 2 3108 352

Ana Mitreska, mitreskaa@nbrm.gov.mk, +389 2 3108 286

Mihajlo Vaskov, vaskovm@nbrm.gov.mk, +389 2 3108 263

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