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Bosnia and Herzegovina: Selected Issues
Author:
International Monetary Fund. European Dept.
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2024: Issue 176
Language:
English
Publication Date:
20 Jun 2024
DOI:
https://doi.org/10.5089/9798400278853.002
ISBN:
9798400278853
ISSN:
1934-7685
Pages:
35
Keywords:
A. labor market market trend; lending interest rate dynamics; interest rate differential; BiH labor market indicator; wage development; capital allocation; Employment; Labor markets; Wage adjustments; Wages; Global; Europe
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This Selected Issues paper provides an overview of interest rate dynamics in Bosnia and Herzegovina (BiH) in relation to global and euro area trends following the recent cycle of monetary tightening. It analyzes the impact of interest rate dynamics on capital allocation both domestically and externally, with a focus on capital outflows. It concludes that the wider spread between domestic interest rates and euro area short-term rates has been associated with capital outflows of around KM 1.7 billion since the European Central Bank started tightening monetary policy in July 2022, mostly in the form of money market placements in the euro area. It also shows that the compression of local interest rates and the few alternative investment opportunities in a limited market appear to have resulted in households and firms placing most of their funds in short-term deposits, making bank funding less stable than under a longer maturity structure. It notes that this lack of investment opportunities may lead to crowding into the real estate sector, with possible implications for financial stability in the long term.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund