MACROECONOMIC DETERMINANTS OF INTEREST RATES IN BRICST, MINT, AND FRAGILE FIVE COUNTRIES: EVIDENCE FROM QUANTILE REGRESSION ANALYSIS

Abstract

As a substantially important indicator for economies, interest rates are influenced by a variety of macroeconomic factors. Considering this fact, the study aims to determine the influential macroeconomic determinants on deposit interest rates in emerging countries by using 12 independent macroeconomic determinants, yearly data between 1980 and 2018, and quantile regression method, which is applied for the first time to analyze interest rates. The empirical results show that influential determinants and their effects on the interest rate are differentiating for countries. The findings reveal that the most important factor in the interest rate is the consumer price index (CPI) in Turkey and Mexico; unemployment in Russia and China; total reserves in Nigeria; GDP in Indonesia; imports of goods and services in Brazil and South Africa. The results of the analysis emphasize the importance of macroeconomic indicators on the interest rates in each quantile. Taking measures by considering the findings of the study, which shows the role and importance of each macroeconomic indicator in quantiles, is essential to promote economic growth via ensuring low-level deposit interest rates and hence providing credit growth in emerging countries.