The Use of Econometric Analysis for Interest Rate Risk, the Impact of GDP and Inflation Factor in Deposit Interest (the Case of Albania)

Abstract

The risk, is an economic concept that gives the impression of a negative impact, unexpected event, condition upon which we can not influence. But it is important to distinguish between risk and danger as both are possible events in the future, but with different effects in conditions that can be affected. Not only the individual economic life, bot also businesses have faced different financial and business risks and its analysis is study object for many commercial units. Exposure to risk has affected in a way that many businesses and financial institutions should take the appropriate measures to protect against this exposure through the use of needed techniques for running it. Banks use different techniques in the management of risk, especially the risk of interest rates and that most used is funds GAP, as a technique, the size of which indicates the risk that bank the bear from changing interest rates and that is reflected in the net interest income. Which are the causes of this interest rate risk? Banks play a vital role in economic growth and in countries development, mainly through diversification of risk for themselves and other economic agents. Interest rate risk is one of the most important financial risks that bank faces. Interest rate risk is the possibility that changes in interest rates affect the interest income and the market value of assets of any investor. A large part of the income derived from net interest income, which comes as the difference between some asset items with the balance sheet liability items of the bank. Fluctuations in interest rates affect the interest rate and the value of the bank, making the management of interest rate risk to be vital to the success of a bank. Based on some basic concepts of risk theory, such as the target in terms of risk, event risk, the probability attached as well as the impact of event risk target, our paper aims to review the risk of interest rates as well as its main direction methods. Special attention was given in this paper to factors that influence the interest rate on deposits as well as assessing the impact of these factors on interest rate, by using an econometric model. The goal is the study of the dependence of the interest rate on deposits from GDP and the inflation rate. For the realization of this paper we have used the program Eviews through which it is established and is proven main hypotheses: if you change the level of GDP, exchange rates ALL / EUR and the rate of inflation, then the level of interest rates on deposits will be adapt to this change. Expressed in other words, the level of deposit interest rates, is depending on GDP, exchange rates ALL / EUR and the rate of inflation. DOI: 10.5901/ajis.2016.v5n3s1p177