Effects of Macroeconomic Environment on Non-Performing Loans and Financial Stability: Case of Bosnia and Herzegovina

Kemal Kozarić () and Emina Žunić Dželihodžić ()
Additional contact information
Kemal Kozarić: School of Economics and Business, Sarajevo, Bosnia and Herzegovina
Emina Žunić Dželihodžić: Central Bank of Bosnia and Herzegovina, Sarajevo, Bosnia and Herzegovina

Journal of Central Banking Theory and Practice, 2020, vol. 9, issue 2, 5-17

Abstract: This paper analyses the impact of macroeconomic conditions on non-performing loans and financial stability in Bosnia and Herzegovina`s banking sector. The aim of this paper is to identify the effects of macroeconomic conditions on non-performing loans and the banking sector`s financial stability. To that end, data for the period 2006-2017 have been used. In order to detect the correlations between analysed variables, we performed the correlation analysis through Pearson coefficient of correlation. Results have confirmed the assumption about correlation between macroeconomic conditions, non-performing loans, and financial stability. Further, regression analysis was applied on data divided into two models: the impact of macroeconomic conditions on non-performing loans and the impact of macroeconomic conditions on the banking sector`s financial stability. Those two models point to the significance of macroeconomic environment for non-performing loans control and financial stability maintenance. Namely, the results have shown that improvement in macroeconomic conditions causes improvement in credit quality. Also, it was disclosed that better macroeconomic conditions ensure better conditions for maintenance of the banking sector`s financial stability.

Keywords: Non-performing loans; Bank; Financial stability; Macroeconomic; Impact (search for similar items in EconPapers)
JEL-codes: G00 G21 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.cbcg.me/repec/cbk/journl/vol9no2-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:9:y:2020:i:2:p:5-17

Access Statistics for this article

More articles in Journal of Central Banking Theory and Practice from Central bank of Montenegro Contact information at EDIRC.
Bibliographic data for series maintained by ().