An Analysis of Macroeconomic Variables and Interest Rate Spread in Pakistan

The research was carried out to examine the impact of macroeconomic variables on Interest Rate Spread (IRS) in the context of Pakistan. The secondary data from 2000 to 2014 was taken to evaluate the results. After evolving of 8 hypotheses, three out of eight hypotheses were rejected, and 5 were accepted. Simple multiple regression model was used as a statistical tool. The results concluded that model was statistically significant and macroeconomic variables have a significant effect on interest rate spread (IRS). Results also depicted that there is a negative relationship between Interest Rate Spread (IRS) and Domestic Gross Product (GDP), Inflation and lending interest rate (LIR). Moreover, there is a positive relationship between IRS and Risk Premium on Lending (RPL)