Testing the Long-term Relationship between Banking Concentration, Interest Rates and Net Interest Margin: A Panel Study

Abstract

The current study aims to study the short and long-term relationship between the banking concentration of Jordanian commercial banks, interest rates and net interest margin using Panel data from (2007-2020), using the autoregressive distributed lag model. The study populations represents of 14 local commercial banks listed on the Amman Stock Exchange. To achieve the objectives and test hypothesis the E-views program was used. The empirical results revealed a long-term relationship between banking concentration, interest rates and net interest margin, and showed a positive impact on net interest margin in the long and short term. Accordingly, the study suggested a set of recommendations, the most important of which was working to enhance competition in the Jordanian commercial banking sector, which makes monetary policy more efficient and reducing transaction costs and diversifying the bank's activities, in addition to reducing the most frequent interest margin to promote investment and growth in Jordan.