Examining the relationship between bank profitability and economic growth: insights from Central and Eastern Europe

In this research article, we delve into the influence of bank profitability on the economic growth of 16 countries in Central and Eastern Europe over the period spanning from 1999 to 2022. Whilelow levels of bank profitability are often seen as a potential threat to economic growth, the question of whether higher profitability contributes positively to growth remains unanswered. Our extensive empirical analysis, utilizing various econometric methods, consistently reveals a statistically and economically significant positive relationship. Specifically, a one percent increase in the return on assets of banks is associated with a notable increase in economic growth, falling within the range of 0.575 to 0.603 percentage points. In addition to these significant findings, future research could delve deeper into the nuanced relationships between different dimensions of bank profitability and economicperformance, including the effects of varying ownership structures and competition dynamics.