The Reasons for Additional Growth Limit of Consumer NonPurpose Loans in the Banking Sector of Bosnia and Herzegovina

Authors

  • Dragan S. Jović Central Bank of Bosnia and Herzegovina

DOI:

https://doi.org/10.7251/ACE1726055J

Keywords:

consumer non-purpose loan, direct regulation of credits, banking sector of Bosnia and Herzegovina, credit growth, crowd out effect, current account

Abstract

The growth in consumer non-purpose loans leads to the reduction in BiH current account balance and amplifies the current account deficit. According to regression models, the commercial loan has the same e?ect on the current account. However, in dynamic VAR models, a commercial loan has, either neutral in?uence on the current account balance, or contributes to its mild growth. A commercial loan is necessary for BiH economy, because the private sector is the main factor of the economic growth, while a consumer non-purpose loan generates mainly demand for import. When a credit growth is very low, the credit is economic and not free good and additional need for the direct regulation of credit appears, especially in countries with underdeveloped financial market. The share of private companies in the credit distribution is reduced and from the economic point of view, redistribution of loans can be made only at the expense of consumer loans. Additional growth limit on the consumer non-purpose loan, which is composed of 74.2% of total consumer loans, and 34.9% of all bank’s loans (10/2016), is one of the preconditions for the decrease of current account deficit, economic growth and economic development acceleration.

References

Atoyan, R., J. Manning, and J. Rahman. (2013). Rebalancing: Evidence from Current Account Adjustment in Europe. IMF Working Paper, No: 13/74.

Aliogullari, H et al. (2015). The Relationship between Consumer and Commercial Loans and Current Account Deficit. ESCB conference, Ljubljana.

Atoyan, Ruben et al. (2013). “Rebalancing: Evidence from Current Account Adjustment in Europe”. WP/13/74.

Banking Agency of the Federation of Bosnia and Herzegovina, www.fa.ba

Banking Agency of the Republic of Srpska, www.abrs.ba

Banjaluka Stock Exchange, www.blberza.com

Bartels, Robert. (1953). Justifcation for Direct Regulation of Consumer Credit Reappraised. The Journal of Finance, Vol.8 No.2, pp. 261-271.

Catao, L., and G.M. Miles-Ferretti. (2013). External Liabilities and Crises. IMF Working Paper, No: 13/113.

Central Bank of Bosnia and Herzegovina, www.cbbh.ba

Ćirović, Milutin. (1982). Monetary and Credit System. Modern administration: Belgrade.

Ćirović, Milutin. (1987). Monetary Economy. The European Center for Peace and Development University for Peace Belgrade.

Ekinci, Fatih M., Erdem, F. Pinar. Kilinc Zubeyir. (2014). Current Account and Financial Depth”. Central Bank of the Republic of Turkey, Working Paper, No: 14/21.

Eurostat, http://ec.europa.eu/eurostat

Gurley, John and Shaw, Edward. (1960). Money in a Theory of Finance. Brookings Institution: Washington D.C.

IMF, www.imf.org

IMF. (2012). “External Balance Assessment (EBA): Technical Background of the Pilot Methodology.” http://www.imf.org/external/np/res/eba/pdf/080312.pdf.

Law on Enforcement Proceedings of the Federation of Bosnia and Herzegovina, Official Gazette of the Federation of Bosnia and Herzegovina No. 32/03 and No. 33/06.

Law on Enforcement Proceedings of the Republic of Srpska, Official Gazette of Republika Srpska No. 85/03, 64/05, 118/07, 29/10, 57/12 and 67/13.

Němec, Daniel and Libor Žídek. (2014). The Role of Exchange Rate Dynamics in Bulgaria and Romania in the Process of Economic Transition. In Talašová, J., Stoklasa, J., Talášek, T. 32nd International Conference Mathematical Methods in Economics Conference Proceedings. Olomouc: Palacký University. pp. 709-714.

Sarajevo Stock Exchange, www.sase.ba

Stranjak, Asim. (1971). Theory of Consumer Loan and our System of Consumer Lending. Informer: Zagreb.

The Agency for Statistics of Bosnia and Herzegovina, www.bhas.ba

Downloads

Published

2017-06-30

How to Cite

Jović, D. S. (2017). The Reasons for Additional Growth Limit of Consumer NonPurpose Loans in the Banking Sector of Bosnia and Herzegovina. Acta Economica, 15(26), 55–73. https://doi.org/10.7251/ACE1726055J

Issue

Section

Original Scientific Papers