Economic Themes (2024) 62 (2) 4, 185-202
Andreja Todorović, Mirjana Jemović, Srđan Marinković
Abstract: The paper analyzes the determinants of bank net interest margin in the selected Southeast European countries in the period from 2012 to 2021. The group includes the countries with similar socio-economic features and financial system. The aim of the paper is to identify the common determinants of net interest margin in the observed banking systems. Given the previous theoretical and empirical studies, the analysis relies on a set of data on macroeconomic and industry variables using the pooled ordinary least square (OLS) regression method, because the preliminary data analyses do not allow for the application of panel regression with fixed or random effects. The predictor variables in the model are: gross domestic product per capita, inflation, exchange rate, real interest rate, concentration, size, capitalization, liquidity of the banking sector and credit risk in the banking sector. Net interest margin (NIM) is used as a dependent variable. The results confirm that the model is statistically significant, and that exchange rate, real interest rate, concentration and size of the banking sector have a significant impact on the variation of the dependent variable. Significant variables also show the expected direction of influence on NIM trends. The growth of exchange rate, real interest rate, concentration and size of the banking sector goes hand in hand with an increase in bank net interest margin in the analyzed countries over the observed period, all other things being equal. The analysis does not confirm the influence of other predictors on NIM.
Keywords: net interest margin; banking industry; macroeconomic determinants; Southeast Europe
AN ANALYSIS OF THE DETERMINANTS OF NET INTEREST MARGIN OF THE BANKING SECTORS IN SOUTHEAST EUROPEAN COUNTRIE
Andreja Todorović, Mirjana Jemović, Srđan Marinković
Abstract: The paper analyzes the determinants of bank net interest margin in the selected Southeast European countries in the period from 2012 to 2021. The group includes the countries with similar socio-economic features and financial system. The aim of the paper is to identify the common determinants of net interest margin in the observed banking systems. Given the previous theoretical and empirical studies, the analysis relies on a set of data on macroeconomic and industry variables using the pooled ordinary least square (OLS) regression method, because the preliminary data analyses do not allow for the application of panel regression with fixed or random effects. The predictor variables in the model are: gross domestic product per capita, inflation, exchange rate, real interest rate, concentration, size, capitalization, liquidity of the banking sector and credit risk in the banking sector. Net interest margin (NIM) is used as a dependent variable. The results confirm that the model is statistically significant, and that exchange rate, real interest rate, concentration and size of the banking sector have a significant impact on the variation of the dependent variable. Significant variables also show the expected direction of influence on NIM trends. The growth of exchange rate, real interest rate, concentration and size of the banking sector goes hand in hand with an increase in bank net interest margin in the analyzed countries over the observed period, all other things being equal. The analysis does not confirm the influence of other predictors on NIM.
Keywords: net interest margin; banking industry; macroeconomic determinants; Southeast Europe
