A Model of the Commercial Loan Rate

MYRON B. SLOVIN, MARIE ELIZABETH SUSHKA

Research output: Contribution to journalArticlepeer-review

55 Scopus citations

Abstract

This paper explores the theoretical and empirical determinants of the commercial loan rate charged by commercial banks based on a model of financial intermediary behavior which assumes monopolistic competition in asset and liability markets. The model incorporates the constraint that banks must maintain at least a minimum quantity of bonds in asset portfolios. Equations are estimated on a time series basis to explain the behavior of commercial loan rates over the period 1953 to 1980. The evidence appears consistent with the hypothesis that commercial banks operate in a market characterized by imperfect competition and that they explicitly set loan rates. 1983 The American Finance Association

Original languageEnglish (US)
Pages (from-to)1583-1596
Number of pages14
JournalThe Journal of Finance
Volume38
Issue number5
DOIs
StatePublished - Dec 1983
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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