INTEREST RATE PASS-THROUGH IN THE BANKING SECTOR OF SERBIA

Keywords:
interest rate pass-through, error-correction model, interest rate risk in the banking book

Abstract:
This paper examines the pass-through of market interest rates to deposit and credit rates in Serbia during the period from 2015M1 to 2025M3. An appropriate econometric analysis is conducted using the error-correction model (ECM) and the ordinary least square method (OLS) to the research questions. The results presented in the paper suggest the presence of a statistically significant, but low, pass-through effect from market interest rates to bank deposit rates within the EUR and EURindexed deposit market as well as to loan rates within the FX (foreign-exchange) and FX-indexed credit market. The pass-through effect of changes in EURIBOR6M is somewhat stronger than the pass-through effect of changes in the Euro area yield curve spot rate for 1-year maturity. The ECM specification indicates that both bank deposit and loan interest rates are likely to adjust to market changes only after a certain time delay. This suggests that the long-run pass-through is slow, and in general, banks respond slowly to changes in interest rates, typically with a time lag.

CITATION:

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D. Cvijanović, “Interest Rate Pass-through In The Banking Sector Of Serbia,” in FINIZ 2025 - The Importance of Business Agility in the Modern Business Environment, Belgrade, Singidunum University, Serbia, 2025, pp. 95-103. doi: 10.15308/finiz-2025-95-103 

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Cvijanović, D. (2025). Interest Rate Pass-through In The Banking Sector Of Serbia. Paper presented at FINIZ 2025 - The Importance of Business Agility in the Modern Business Environment. doi:10.15308/finiz-2025-95-103

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