The impact of macroeconomic factors on the fluctuation of loan interest rates

Fidane Spahija-Gjikolli; Engelbert Zefaj; Kestrim Avdimetaj

doi:10.31893/multiscience.2025358

Keywords:

Abstract

This paper examines the impact of macroeconomic factors on the fluctuation of loan interest rates. Using empirical data and statistical analysis, the main macroeconomic factors influencing the fluctuation of loan interest rates are identified and evaluated. The gross domestic product (GDP) factor, inflation and demographic trends are considered in this analytical research. The results of the study reveal a significant relationship between these factors and the fluctuation of interest rates, thus providing a deeper understanding of how these macroeconomic variables affect the financial market and the decisions of borrowers and lenders. This study contributes to the literature by providing new insights into the dynamics of interest rates in a developing economy.
References
1. Alhassan, M., Fred, K. A., & Erasmus, D. G. (2018). The impact of interest rate spread on bank profitability in Ghana. European Journal of Business, Economics and Accountancy, 6(1), 1–13.
2. Aliu, F., Knapkova, A., Aliyev, K., & Nadirov, O. (2016). Factors affecting interest rate risk: The case of Kosovo. Proceedings of the 6th EACO International Scientific Conference, 1–15.
3. Ante Džidić, I. Ž. (2022). Macroeconomic factors of non-performing loans: The case of Bosnia and Herzegovina. Hrcak. https://doi.org/10.17818/EMIP/2022/2.4
4. Ashraf, B. N., & Shen. (2019). Economic policy uncertainty and banks’ loan pricing. Journal of Financial Stability, 44(2019), 1–12.
5. Bank, F. R. (2017). Understanding the economics of credit risk. New York: Federal Reserve Bank of New York.
6. Bauer, M. D., & Rudebusch, G. D. (2017). Interest rates under falling stars. CESifo Working Paper, 6571, 1–45.
7. Berger, A. N., Molyneux, P., & Wilson, J. O. S. (2020). Banks and the real economy: An assessment of the research. Journal of Corporate Finance, 62(2020), 1–61.
8. BQK. (n.d.). Raportet vjetore. Banka Qendrore e Kosovës. Retrieved from https://bqk-kos.org/publikimet/raporti-i-informatave-mujore-te-sistemit-financiar/
9. Brosworth, B. (n.d.). Interest rates and economic growth: Are they related? Retirement Research Consortium.
10. Carvalho, C., Ferrero, A., & Nechio, F. (2016). Demographics and real interest rates: Inspecting the mechanism. European Economic Review, Elsevier, 88(C), 208–226.
11. Chiriluș, I. (2022). Interest rates and economic growth in Romania: Is there cointegration? Journal of Social and Economics Statistics, 11(1–2), 132–143.
12. De Haas, R., & Naaborg, I. (2006). Foreign banks in transition countries: To whom do they lend and how are they financed? Financial Markets, Institutions & Instruments, 15(4), 159–199.
13. Dewachter, H., & Lyrio, M. (2006). Macro factors and the term structure of interest rates. Journal of Money, Credit and Banking, 119–140.
14. Doe, A. (2020). Classification of loans in financial institutions. International Journal of Finance and Economics, 25(3), 567–589.
15. ECB. (2021). Guidelines on the classification of loans and credit. Frankfurt am Main: European Central Bank Publication.
16. Fabozzi, F. J. (2018). Foundations of Financial Markets and Institutions. New York: Pearson.
17. Ferrari, A., Masetti, O., & Ren, J. (2018). Interest rate caps: The theory and the practice. Washington DC: World Bank Policy Research - Working Paper No.8398.
18. Fetai, B. (2015). Financial integration and financial development: Does financial integration matter? European Research Studies, 18(2), 97.
19. Fetai, B., Koku, P. S., Caushi, A., & Fetai, A. (2016). The relationship between exchange rate and inflation: The case of Western Balkans countries. Journal of Business Economics and Finance, 5(4), 360–364.
20. Gashi, L. B. (2018). Financimi dhe Kreditimi në Bankat Komerciale (Financing and Lending in Commercial Banks). Prishtina: University of Prishtina Publications.
21. Hasani, R. (2017). Normat e Interesit dhe Ndikimi i Tyre në Ekonomi (Interest Rates and Their Impact on the Economy). Tirana: Economic Publishing House.
22. Kelmendi, N. (2019). Depozitat dhe Kostoja e Interesit në Kreditë Komerciale (Deposits and Interest Cost in Commercial Loans). Prishtina: Kosovo Financial Institute.
23. Kindleberger, C. P., & Robert, Z. A. (2011). Manias, Panics, and Crashes: A History of Financial Crises. New Jersey: John Wiley & Sons, Inc.
24. Kozlov, R. (2023). The effect of interest rate changes on consumption: An age-structured approach. Economies, 11(23), 1–25.
25. Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). The expansion of services in European banking: Implications for loan pricing and interest margins. J. Bank. Financ., 32(1), 2325–2335.
26. Mishkin, F. (2016). The Economics of Money, Banking, and Financial Markets. New York: Pearson.
27. Obstfeld, M., & Rogof, K. (2009, November 01). Global imbalances and the financial crisis: Products of common causes. Proceedings, Federal Reserve Bank of San Francisco, Oct, 131–172. Retrieved from https://eml.berkeley.edu/~obstfeld/santabarbara.pdf
28. Owuor, N. D., Githii, W., & Mwangi, M. (2018). The relationship between macroeconomic factors and mortgage market growth in Kenya. European Scientific Journal, 14(10), 68–82.
29. Riadi, S. (2018). The effect of third parties' funds, non-performing loans, capital adequacy ratio, loan to deposit ratio, return on assets, net interest margin, and operating expenses/operating income on lending. IEOM Society International, 1015–1026.
30. Saunders, A., Cornett, M., & Erhemjamts, O. (2018). Financial Institutions Management: A Risk Management Approach. New York: McGraw-Hill Education.
31. Sethi, D., & Acharya, D. (2018). Financial inclusion and economic growth linkage: Some cross-country evidence. Journal of Financial Economic Policy, 10(3), 369–385.
32. Smith, J. (2019). The role of investment loans in economic development. Journal of Banking and Finance, 43(2), 123–145.
33. Song, H., Yu, K., & Lu, Q. (2018). Financial service providers and banks’ role in helping SMEs to access finance. International Journal of Physical Distribution & Logistics Management, 48(1), 69–92.
34. Suyuan, L., & Khurshid, A. (2015). The effect of interest rate on investment: Empirical evidence of Jiangsu Province, China. Journal of International Studies, 8(1), 81–90.
35. Szarowska, I. (2018). Effect of macroeconomic determinants on non-performing loans in Central and Eastern European countries. International Journal of Monetary Economics and Finance, 11(1), 20–35.
36. Valta, P. (2012). Competition and the cost of debt. Journal of Financial Economics, 105(3), 661–682.
37. Vo, X. (2018). Bank lending behavior in emerging markets. Finance Research Letters, 27(2018), 129–134.
38. Waisman, M. (2013). Product market competition and the cost of bank loans: Evidence from state antitakeover laws. Journal of Banking & Finance, 37(12), 4721–4737.
39. WB. (2018). Financial sector development and the role of investment loans. World Bank Publications.
40. Yuri, B. (2018). Banking, money, and credit: A systemic perspective. Accounting, Economics, and Law: A Convivium, 8(2), 1–26.

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to cite

Spahija-Gjikolli, F., Zefaj, E., & Avdimetaj, K. (2025). The impact of macroeconomic factors on the fluctuation of loan interest rates. Multidisciplinary Science Journal, 7(9), 2025358. https://doi.org/10.31893/multiscience.2025358

[1] Alhassan, M., Fred, K. A., & Erasmus, D. G. (2018). The impact of interest rate spread on bank profitability in Ghana. European Journal of Business, Economics and Accountancy, 6(1), 1–13.

[2] Aliu, F., Knapkova, A., Aliyev, K., & Nadirov, O. (2016). Factors affecting interest rate risk: The case of Kosovo. Proceedings of the 6th EACO International Scientific Conference, 1–15.

[3] Ante Džidić, I. Ž. (2022). Macroeconomic factors of non-performing loans: The case of Bosnia and Herzegovina. Hrcak. https://doi.org/10.17818/EMIP/2022/2.4

[4] Ashraf, B. N., & Shen. (2019). Economic policy uncertainty and banks’ loan pricing. Journal of Financial Stability, 44(2019), 1–12.

[5] Bank, F. R. (2017). Understanding the economics of credit risk. New York: Federal Reserve Bank of New York.

[6] Bauer, M. D., & Rudebusch, G. D. (2017). Interest rates under falling stars. CESifo Working Paper, 6571, 1–45.

[7] Berger, A. N., Molyneux, P., & Wilson, J. O. S. (2020). Banks and the real economy: An assessment of the research. Journal of Corporate Finance, 62(2020), 1–61.

[8] BQK. (n.d.). Raportet vjetore. Banka Qendrore e Kosovës. Retrieved from https://bqk-kos.org/publikimet/raporti-i-informatave-mujore-te-sistemit-financiar/

[9] Brosworth, B. (n.d.). Interest rates and economic growth: Are they related? Retirement Research Consortium.

[10] Carvalho, C., Ferrero, A., & Nechio, F. (2016). Demographics and real interest rates: Inspecting the mechanism. European Economic Review, Elsevier, 88(C), 208–226.

[11] Chiriluș, I. (2022). Interest rates and economic growth in Romania: Is there cointegration? Journal of Social and Economics Statistics, 11(1–2), 132–143.

[12] De Haas, R., & Naaborg, I. (2006). Foreign banks in transition countries: To whom do they lend and how are they financed? Financial Markets, Institutions & Instruments, 15(4), 159–199.

[13] Dewachter, H., & Lyrio, M. (2006). Macro factors and the term structure of interest rates. Journal of Money, Credit and Banking, 119–140.

[14] Doe, A. (2020). Classification of loans in financial institutions. International Journal of Finance and Economics, 25(3), 567–589.

[15] ECB. (2021). Guidelines on the classification of loans and credit. Frankfurt am Main: European Central Bank Publication.

[16] Fabozzi, F. J. (2018). Foundations of Financial Markets and Institutions. New York: Pearson.

[17] Ferrari, A., Masetti, O., & Ren, J. (2018). Interest rate caps: The theory and the practice. Washington DC: World Bank Policy Research - Working Paper No.8398.

[18] Fetai, B. (2015). Financial integration and financial development: Does financial integration matter? European Research Studies, 18(2), 97.

[19] Fetai, B., Koku, P. S., Caushi, A., & Fetai, A. (2016). The relationship between exchange rate and inflation: The case of Western Balkans countries. Journal of Business Economics and Finance, 5(4), 360–364.

[20] Gashi, L. B. (2018). Financimi dhe Kreditimi në Bankat Komerciale (Financing and Lending in Commercial Banks). Prishtina: University of Prishtina Publications.

[21] Hasani, R. (2017). Normat e Interesit dhe Ndikimi i Tyre në Ekonomi (Interest Rates and Their Impact on the Economy). Tirana: Economic Publishing House.

[22] Kelmendi, N. (2019). Depozitat dhe Kostoja e Interesit në Kreditë Komerciale (Deposits and Interest Cost in Commercial Loans). Prishtina: Kosovo Financial Institute.

[23] Kindleberger, C. P., & Robert, Z. A. (2011). Manias, Panics, and Crashes: A History of Financial Crises. New Jersey: John Wiley & Sons, Inc.

[24] Kozlov, R. (2023). The effect of interest rate changes on consumption: An age-structured approach. Economies, 11(23), 1–25.

[25] Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). The expansion of services in European banking: Implications for loan pricing and interest margins. J. Bank. Financ., 32(1), 2325–2335.

[26] Mishkin, F. (2016). The Economics of Money, Banking, and Financial Markets. New York: Pearson.

[27] Obstfeld, M., & Rogof, K. (2009, November 01). Global imbalances and the financial crisis: Products of common causes. Proceedings, Federal Reserve Bank of San Francisco, Oct, 131–172. Retrieved from https://eml.berkeley.edu/~obstfeld/santabarbara.pdf

[28] Owuor, N. D., Githii, W., & Mwangi, M. (2018). The relationship between macroeconomic factors and mortgage market growth in Kenya. European Scientific Journal, 14(10), 68–82.

[29] Riadi, S. (2018). The effect of third parties' funds, non-performing loans, capital adequacy ratio, loan to deposit ratio, return on assets, net interest margin, and operating expenses/operating income on lending. IEOM Society International, 1015–1026.

[30] Saunders, A., Cornett, M., & Erhemjamts, O. (2018). Financial Institutions Management: A Risk Management Approach. New York: McGraw-Hill Education.

[31] Sethi, D., & Acharya, D. (2018). Financial inclusion and economic growth linkage: Some cross-country evidence. Journal of Financial Economic Policy, 10(3), 369–385.

[32] Smith, J. (2019). The role of investment loans in economic development. Journal of Banking and Finance, 43(2), 123–145.

[33] Song, H., Yu, K., & Lu, Q. (2018). Financial service providers and banks’ role in helping SMEs to access finance. International Journal of Physical Distribution & Logistics Management, 48(1), 69–92.

[34] Suyuan, L., & Khurshid, A. (2015). The effect of interest rate on investment: Empirical evidence of Jiangsu Province, China. Journal of International Studies, 8(1), 81–90.

[35] Szarowska, I. (2018). Effect of macroeconomic determinants on non-performing loans in Central and Eastern European countries. International Journal of Monetary Economics and Finance, 11(1), 20–35.

[36] Valta, P. (2012). Competition and the cost of debt. Journal of Financial Economics, 105(3), 661–682.

[37] Vo, X. (2018). Bank lending behavior in emerging markets. Finance Research Letters, 27(2018), 129–134.

[38] Waisman, M. (2013). Product market competition and the cost of bank loans: Evidence from state antitakeover laws. Journal of Banking & Finance, 37(12), 4721–4737.

[39] WB. (2018). Financial sector development and the role of investment loans. World Bank Publications.

[40] Yuri, B. (2018). Banking, money, and credit: A systemic perspective. Accounting, Economics, and Law: A Convivium, 8(2), 1–26.

Abstract

References

How to cite