Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia

Following foreign bank entry, credit interest rates have been extremely high in Serbia compared with a reference group of countries: Croatia, Bulgaria and Romania. This is connected with monetary authorities' poor predictions regarding the behavior of those banks in setting interest rates, crea...

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Main Author: Đukić Đorđe
Format: Article
Language:English
Published: Economists' Association of Vojvodina 2007-01-01
Series:Panoeconomicus
Subjects:
Online Access:http://www.doiserbia.nb.rs/img/doi/1452-595X/2007/1452-595X0704429D.pdf
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spelling doaj-7d4d61eea72f48699b271881effa201c2020-11-24T22:23:40ZengEconomists' Association of VojvodinaPanoeconomicus1452-595X2007-01-0154442944310.2298/PAN0704429DAnalysis of effects of foreign bank entry on credit interest rate behavior in SerbiaĐukić ĐorđeFollowing foreign bank entry, credit interest rates have been extremely high in Serbia compared with a reference group of countries: Croatia, Bulgaria and Romania. This is connected with monetary authorities' poor predictions regarding the behavior of those banks in setting interest rates, creating an illusion that competition, per se, would rapidly result in decreasing interest rates; as well as undertaking monetary policy measures-such as an extreme increase in the reserve requirements rate-that contributed to unchanged or increased credit interest rates. The final outcome of poor predictions and measures undertaken by the National Bank of Serbia is limited to periodical appeals by its highest officials to citizens to consider the conditions under which they borrow from banks. However, under conditions of fully inelastic demand for bank credit and a cartel presence in the banking sector, such appeals are ineffective, merely reflecting an attempt to avoid responsibility for a possible wave of bankruptcies in the household sector. Only increasing competition among banks can lead to a significant decrease in credit interest rates in Serbia in the medium term. Empirical analysis shows that competition should be most intensive on the mortgage loan market. http://www.doiserbia.nb.rs/img/doi/1452-595X/2007/1452-595X0704429D.pdfinterest rateforeign banksSerbia
collection DOAJ
language English
format Article
sources DOAJ
author Đukić Đorđe
spellingShingle Đukić Đorđe
Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
Panoeconomicus
interest rate
foreign banks
Serbia
author_facet Đukić Đorđe
author_sort Đukić Đorđe
title Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
title_short Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
title_full Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
title_fullStr Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
title_full_unstemmed Analysis of effects of foreign bank entry on credit interest rate behavior in Serbia
title_sort analysis of effects of foreign bank entry on credit interest rate behavior in serbia
publisher Economists' Association of Vojvodina
series Panoeconomicus
issn 1452-595X
publishDate 2007-01-01
description Following foreign bank entry, credit interest rates have been extremely high in Serbia compared with a reference group of countries: Croatia, Bulgaria and Romania. This is connected with monetary authorities' poor predictions regarding the behavior of those banks in setting interest rates, creating an illusion that competition, per se, would rapidly result in decreasing interest rates; as well as undertaking monetary policy measures-such as an extreme increase in the reserve requirements rate-that contributed to unchanged or increased credit interest rates. The final outcome of poor predictions and measures undertaken by the National Bank of Serbia is limited to periodical appeals by its highest officials to citizens to consider the conditions under which they borrow from banks. However, under conditions of fully inelastic demand for bank credit and a cartel presence in the banking sector, such appeals are ineffective, merely reflecting an attempt to avoid responsibility for a possible wave of bankruptcies in the household sector. Only increasing competition among banks can lead to a significant decrease in credit interest rates in Serbia in the medium term. Empirical analysis shows that competition should be most intensive on the mortgage loan market.
topic interest rate
foreign banks
Serbia
url http://www.doiserbia.nb.rs/img/doi/1452-595X/2007/1452-595X0704429D.pdf
work_keys_str_mv AT đukicđorđe analysisofeffectsofforeignbankentryoncreditinterestratebehaviorinserbia
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