Using the World Bank Data obtain the annual data on the interest-rate spread and
the economic growth for upper middle-income countries between 1996 and 2020.
Plot of the interest-rate spread and the economic growth for upper middle-income
countries between 1996 and 2020 is as follows:
The interest rate spread refers to the difference between the interest rate that a bank
charges on loan to commercial banks and private sector customers and can have an
impact on economic growth. However, other factors such as government policies,
trade agreements, and global economic conditions, can also influence in determining
the interest rates.
In general, a higher interest rate spread can lead to slower economic growth due to
higher spread can make it more expensive for businesses and consumers to borrow
money, which can reduce investment and spending. Though, referring to the data
obtained from World Bank Data and graph above implies that the relationship
between the interest rate spread and economic growth is not always straightforward.
The graph illustrates that when the interest rate spread is at its highest peak of 8.45%
in year 2000, the GDP growth rate was not at its lowest trough. Conversely, the GDP
growth in year 2000 had increased to the rate of 6.4% from previous year.
Additionally, the GDP growth rate is more volatile and fluctuate while the interest
rate spread is less volatile. In conclusion, changes in the interest rate spread could not
be used solely in depicting the economic growth but plays a role in influencing the
Interest rate spread and the GDP growth for upper middle-
Average interest rate spread
Average GDP growth (Annual %)