Does monetary policy impact banking spreads?

The nominalisation of interest rates has led to a breakdown in the relationship between banking spreads and monetary policy in Chile, argues a paper from the central bank.

Research by the Central Bank of Chile has found that there was a positive correlation between rates and banking spreads before nominalisation took place in August 2001.

The data also showed an increase in the banking sector's market concentration to have prompted a reduction in intermediation spreads and that spreads increase

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