Determinants of the Financial Stability of the Banking Sector of Bosnia and Herzegovina

Almir Alihodzić – University of Zenica – Faculty of Economics, Fakultetska bb, Bosnia and Herzegovina

Emina Hadzić – JASMIN M, Zepée, Bosnia and Herzegovina

Abstract: This paper investigates the impact of explanatory variables that determine the financial stability of the banking sector in Bosnia and Herzegovina, and the possibility of controlling credit risk, which is a threat to the stability of the financial system for the period from 2009 to 2019 on a quarterly basis. Correlation and panel regression analysis are also applied in this paper. The selected independent (explanatory) variables are the growth rate of savings of the household sector, the growth rate of foreign direct investments, the growth rate of exports, the growth rate of total loans, the growth rate of non-per- forming loans, the growth rate of capital adequacy ratio, and unemployment growth rate. The GDP growth rate will be used as the dependent variable. The research results showed that the most significant impact on the GDP growth rate was recorded by the following variables: the growth rate of foreign direct investment, the growth rate of exports and the growth rate of total loans. On the other hand, the following variable recorded the most significant negative impact: the growth rate of the household sector. The study also shows that there is a positive causal relationship between the growth rate of non-performing loans and the growth rate of unemployment.

10th International Scientific Conference ERAZ 2024 – Conference Proceedings: KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT,  hybrid – online, virtually and in person, Lisbon, Portugal, June 6, 2024

ERAZ Conference Proceedings published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ERAZ conference partners: Faculty of Logistics, University of Maribor, Maribor (Slovenia); University of National and World Economy – UNWE, Sofia (Bulgaria); Center for Political Research and Documentation (KEPET), Research Laboratory of the Department of Political Science of University of Crete (Greece); Institute of Public Finance – Zagreb (Croatia); Faculty of Tourism and Hospitality Ohrid, University of St. Kliment Ohridski from Bitola (North Macedonia)

ERAZ Conference 2024 Conference Proceedings: ISBN 978-86-80194-86-8, ISSN 2683-5568,

DOI: https://doi.org/10.31410/ERAZ.2024

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-Non-Commercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission. 

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