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Pressure on interest rates on deposits in Croatia: government bonds or European Central Bank?

Author

Listed:
  • Lucija Rasic

    (Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia)

  • Noa Hinger

    (Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia)

Abstract

The paper analyses the importance of government bonds as the key instrument on the capital market and their effect on interest rates on deposits in Croatia. February 2023 saw the first government bonds issued in Croatia, which provided citizens with safe investment opportunities, especially following low interest rates periods across Europe that continued several months into Croatia’s accession to the euro area. The authors define two hypotheses regarding the effect of government bonds and the European Central Bank (ECB) on interest rates, trying to determine whose relative effect was greater of the two. Combining principal component analysis and regression analysis, the authors determine that government bonds have a limited effect on interest rates, whereas ECB’s effect is much more significant. The results suggest a complex dynamic between fiscal and monetary policy, highlighting proactive government measures for stimulating investments and development of the Croatian capital market.

Suggested Citation

  • Lucija Rasic & Noa Hinger, 2025. "Pressure on interest rates on deposits in Croatia: government bonds or European Central Bank?," Public Sector Economics, Institute of Public Finance, vol. 49(1), pages 45-59.
    • Handle: RePEc:ipf:psejou:v:49:y:2025:i:1:p:45-59
    DOI: 10.3326/pse.49.1.2
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    More about this item

    Keywords

    factor analysis; government bonds; interest rates; deposits; regression analysis; Croatia;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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