Republic of Azerbaijan: Selected Issues

Abstract

This Selected Issues paper uses a bank-level panel dataset to investigate the determinants of bank interest spreads in Azerbaijan over 2002â??2013. The dealership model of Ho and Saunders is applied, supplemented by market structure and macroeconomic environment variables, to assess the extent to which high spreads of banks in Azerbaijan can be related to bank-specific variables or to a low degree of competition, controlling for macroeconomic factors. It is found that interest spreads are affected by operation cost efficiency, credit risk, liquidity risk, bank size, bank diversification, banki. Cover; Contents; DETERMINANTS OF BANK SPREADS IN AZERBAIJAN; A. Introduction; B. Methodology; C. Data and Variables; TABLES; 1. Variables Definitions and Sources; D. Empirical Results; 2. List of banks used in the sample; 3. Summary Statistics and Correlations Tables; 4. Determinants of Net Interest Spreads; E. Concluding Remarks; 5. Economic Significance; FIGURE; 1. Financial Sector Indicators, 2002, 2007 and 2011; REFERENCES; ASSESSING FINANCIAL DEVELOPMENT IN AZERBAIJAN; A. Assessing Financial Depth; FIGURES; 1. Financial Reforms and Deepening, 2012. 2. Financial Sector Infrastructure, 2011TABLES; 1. Determinants of Credit Growth Summary Statistics; 2. Financial Development in Developing & Emerging Market Economies 1990-2012; B. Assessing the Relationship between Finance and Growth; 3. Measures of Credit and Monetary Development, 2000-13; 3. Determinants of Real Non-hydrocarbon GDP Growth, 2003Q1-2012Q4; 4. Johansen Cointegration Test Results; C. Conclusion; 5. VAR Model of Real Non-hydrocarbon GDP Growth, 2003Q1-2012Q4.