Abstract
This paper investigates the determinants of the high bank spreads observed in the Caribbean over the financially liberalised period of the 1990s. A theoretical model is formulated and tested using panel data. Among other factors, market power is found to be one of the main influences on these large spreads. A major conclusion of the paper is that to reduce interest rate spreads, alternatives to commercial banks' loans should be encouraged, and the recent move to impose monetary regulations on non-banks be discouraged.
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