We divide our analysis into three steps. In the first step, we make an unconditional test of the cross country equality of interest rates, using two different econometric methods. In the other steps, we continue to use only one of two methods allowing for the effect of the main determinants of bank interest rates. If rates are different, but the difference is due to economic factors, it should disappear once we control for these factors. In our estimations we include the main determinants of bank interest rates, both “demand side” characteristics (second step) and “supply side” characteristics (third step). The issues in the extensive literature on bank interest rates are a second field of economic research related to this work. .
