ANALYSIS OF INTEREST RATES AND BANKING SECTOR PROFITABILITY

Kemal Kozarić and Emina Žunić Dželihodžić

Ekonomske ideje i praksa, 2020, issue 36, 21-30

Abstract: Global low interest rate environment enforced banks to lower interest rates what should directly affect their profitability. Thus, this paper focuses on analysis of bank interest rate and profitability movement and their relation. Return on equity is used as measure of bank profitability. Paper presents differences and similarities between selected Western Balkan countries in terms of banking interest rates and profitability. In empirical part of research different scientific methods were used. For that purpose, data from Central Bank of Bosnia and Herzegovina for period 2008-2018 were used. At the beginning of analysis Pearson coefficient of correlation between analyzed variables was performed. After that regression analysis was implemented. Results indicate on positive relation of long-term interest rates and negative relation of short term-interest rates with banking sector profitability.

Keywords: profitability; interest rate; spread (search for similar items in EconPapers)
JEL-codes: E49 G21 (search for similar items in EconPapers)
Date: 2020
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