Abstract
This paper investigates whether and how key macro-fundamentals in Serbia affect the volumes of issued loans of Erste bank to public and business sector in Serbia. We made an effort to determine which particular macro factor has the highest influence on issued credits of Erste bank, and to measure the exact average magnitude of these influences. The main idea is to find out how GDP, inflation, central bank referent interest rate, exchange rate changes and Euribor affect short-term and long-term credit activity of Erste bank in Serbia. The computations are done by applying several multivariate regression models in which dependant variables are the volume of issued credits towards civil sector and enterprises. Based on the results, we can report that Euribor is the most important factor of all scrutinized macro-aggregates, since it affects most of the analysed bank loans. Besides Euribor, we find that other macro fundamentals influence the issued loans only sporadically. In other words, the level of GDP and inflation affect only long-term loans for businesses, while referent interest rate influences only short-term loans for public. We find that exchange rate changes have no effect on any loan of Erste bank, whatsoever, which clearly indicates that the bank protects itself very successfully against this type of macro risk.
Highlights
Various financial intermediaries, such as investment companies, mutual funds, insurance companies and banks, play a crucial role in development of economy and their prosperity is important for an overall macroeconomic stability. Hasanov, Bayramli and AlMusehel (2018) asserted that global trends show that the share of the banking sector in the financial system has increased in recent decades. Ongore (2013) contended that commercial banks play a vital role in the economic resource allocation and contribute to country’s economic growth by making funds available for investors to borrow
This paper examines how key macro-economic factors – GDP, inflation, referent interest rate, exchange rate changes and Euribor affect the volume of issued loans of Erste bank to civil population and enterprises in Serbia
Despite common opinion that macro factors influence bank business in one way or another, we find that not all fundamentals impact the bank credit activity
Summary
Various financial intermediaries, such as investment companies, mutual funds, insurance companies and banks, play a crucial role in development of economy and their prosperity is important for an overall macroeconomic stability (see e.g. Lojanica and Tubić-Ćurčić, 2019). Hasanov, Bayramli and AlMusehel (2018) asserted that global trends show that the share of the banking sector in the financial system has increased in recent decades. Ongore (2013) contended that commercial banks play a vital role in the economic resource allocation and contribute to country’s economic growth by making funds available for investors to borrow. Ongore (2013) contended that commercial banks play a vital role in the economic resource allocation and contribute to country’s economic growth by making funds available for investors to borrow. Various financial intermediaries, such as investment companies, mutual funds, insurance companies and banks, play a crucial role in development of economy and their prosperity is important for an overall macroeconomic stability Their performance can be impacted by different internal and external factors which can be classified into bank specific (internal) and macroeconomic variables, as Ongore (2013) pointed out. The external factors are more important and have more profound impact on banks, because they can influence whole sectors or an entire country, and as such they are beyond the control of any bank and can inflict serious problems on bank
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
