IMF Staff Country Reports

Bosnia and Herzegovina: Selected Issues

June 20, 2024

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Format: Chicago

International Monetary Fund. European Dept. "Bosnia and Herzegovina: Selected Issues", IMF Staff Country Reports 2024, 176 (2024), accessed November 23, 2024, https://doi.org/10.5089/9798400278853.002

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Summary

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.

Subject: Employment, Labor, Labor markets, Wage adjustments, Wages

Keywords: A. labor market market trend, BiH labor market indicator, Capital allocation, Employment, Europe, Global, Interest rate differential, Labor markets, Lending interest rate dynamics, Wage adjustments, Wage development, Wages

Publication Details

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