International University of Travnik , Travnik , Bosnia and Herzegovina
We will present one of many causes of the economic and financial crisis in Bosnia and Herzegovina and other Western Balkan countries. Economic experts think that inflation is among the most important triggers of the crisis. Inflation implies an overall increase of prices of goods and services, and a radical form of inflation is hyperinflation and galloping inflation. We will show the impact of inflation on the investment projects, as well as the nominal and real rate of returns using the Fisher`s equation. The required rate of returns on the financial markets always includes risk premium to compensate the investors for the inflation-induced losses. Inflation is in Bosnia and Herzegovina has reached 17.5% in 2022, whereas it has been somewhat lower in neighboring countries; however, it has created far-reaching consequences on the economies of these countries. The main goal of the research is to grasp what were the counter-inflationary measures undertaken by other Western Balkan countries, aiming at mitigating the adverse effects of inflation on their economies and households.
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