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Original scientific paper

https://doi.org/10.15179/pkiep.27.1.2

Can the Adoption of the Euro in Croatia Reduce the Cost of Borrowing?

Davor Kunovac ; Croatian National Bank
Nina Pavić orcid id orcid.org/0000-0003-1733-5213 ; Croatian National Bank


Full text: croatian pdf 581 Kb

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Abstract

The paper analyzes the impact of euro adoption on the reduction of borrowing costs of EU member states. The results of the analysis point to the existence of a “euro premium” – after controlling for the dynamics in the macroeconomic fundamentals of particular countries and the market sentiment, member states of the monetary union have, on average, lower borrowing costs and higher credit ratings than other EU member states. In order to draw attention to the significance that the results could have for bank interest rates in Croatia in the event of euro adoption, a simple VAR model is used to demonstrate that there is a statistically significant transmission of the changes in government borrowing costs to interest rates on bank loans.

Keywords

euro; borrowing costs; CDS spread; credit rating; Croatia

Hrčak ID:

208244

URI

https://hrcak.srce.hr/208244

Publication date:

14.11.2018.

Article data in other languages: croatian

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