DA LI PROFITABILNOST BANAKA UTIČE NA PRIVREDNI RAST: PRIMERI BANAKA POJEDINIH ZEMALJA ZAPADNOG BALKANA

Banks play an important role in a country’s economy because increasing savings and capital accumulation has a positive effect on economic growth and employment through the banks’ resource transfer function. The purpose of this study is to establish a cause-and-effect relationship between bank profitability and economic growth in three selected countries, including Bosnia and Herzegovina, Serbia, and Croatia. In this research, a panel causality test is applied to examine the cause-and-effect relationship for the time period from the first quarter of 2008 to the fourth quarter of 2020. Empirical findings in this study showed that the profitability of banks in selected developing countries (Bosnia and Herzegovina, Serbia and Croatia) has a positive effect on economic growth. Also, this research provides insight into in-depth analysis in terms of considering several countries through the use of a panel causality test, for the purpose of studying the relationship between bank profitability and economic growth. the first and second profitability indicators (return on assets - ROA and return on equity - ROE) with the indicator of economic growth expressed in real GDP. Therefore, this means that a high level of bank performance through bank performance affects the promotion of economic development, in line with the findings of Ayadi et al. (2010) and Yudistira and Ike (2014). Profitable banks are key drivers of economic growth. The results of the research suggest a positive relationship between bank profitability and economic growth. Therefore, the research results suggest that with an increasing the profitability of banks affects the increase in economic growth. Also, these results show that markets with a higher bank presence have a significantly higher growth rate. This further means that cooperative banks have a significant market share in lending to small and medium-sized enterprises, which are often recognized as drivers of economic development, especially in transition economies.