The study aims to examine the interest rate margin and its relationship to loans and deposits in Iraq, China and Japan, using the VAR model. The study found that there is a causal relationship with a direction from deposits to margin interest rates. The absence of a causal relationship between loans and margin rate interest that the probability (p-Probability) greater than 5%, was residuum tested and make sure it is distributed naturally depending on the Jarque-Bera test. The study also found that the margin of interest rates is high significantly in Iraq because of having little investment and other tools dating profit on banks in comparison with China and Japan. This shows the volume of exploitation from Iraqi commercial banks accepted customers, unlike what happened in China and Japan who are working to achieve the country’s economic interest with the interest of banking. Despite the high interest rates on loans, loans have taken an upward path due to individuals’ need for loans and the failure to provide areas other than commercial banks For these loans. The study recommended the necessity of directing Iraqi commercial banks to use other investment tools that yield profits and help them to reduce the interest rate margin by reducing the interest rates on loans and working to increase the interest rate margin on deposits. This would enable them to attract. Individual funds and increase savings that enable commercial banks to increase their investments and consequently increase their profits. It also recommends increasing the investment of loans in productive areas and moving away from consumer areas.

Key words: interest rate margin, bank deposits, bank loans.

Salam Hashem Muhammad *a        ,      Haidar Thijel Jawadb

a Ministry of Education / Muthanna Education Directorate.

b Al-Muthanna University / College of Administration and Economics.

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