Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87310
Authors: 
Ridhwan, Masagus M.
de Groot, Henri L.F.
Rietveld, Piet
Nijkamp, Peter
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-073/3
Abstract: 
This paper explores the determinants of regional differences in interest rates based on a simple theoretical model of loan pricing. The model demonstrates how risks, costs, market concentration and scale economies jointly determine the bank's interest rates. Using recent data of the Indonesian local credit markets, we find that regional interest rate variations are positive and significantly affected by the banks' risk factor, the operating costs, and market concentration. Scale economies negatively affect the interest rates. These findings help to explain geographical segmentation in loan markets.
Subjects: 
regional capital mobility
loan pricing
interest rates
Indonesia
JEL: 
R51
E43
C33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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