Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states

Kjosevski, Jordan; Petkovski, Mihail

doi:10.1007/s10663-020-09491-5

Cited by 22 publications

(26 citation statements)

References 31 publications

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“…Both papers document policymakers' importance of monitoring macroeconomic conditions to ensure a more robust Indian financial system. Moreover, Kjosevski and Petkovski (2021) examine the bank-specific and macro determinants on NPLs for the Baltics States. By a Panel framework, their empirical work documents that the GDP, unemployment, public debt, and inflation significantly impact NPLs.…”

Section: Literature Overviewmentioning

confidence: 99%

Non-Performing Loans and Macroeconomics Factors: The Italian Case

Foglia

2022

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The purpose of this work is to investigate the influence of macroeconomics determinants on non-performing loans (NPLs) in the Italian banking system over the period 2008Q3–2020Q4. We mainly contribute to the literature by being the first empirical article to study this relationship in the Italian context in the recent period, thus providing fresh evidence on the macroeconomic impact on NPLs, i.e., on the credit risk of Italian banks. By employing the Autoregressive Distributed Lag (ARDL) cointegration model, we are able to investigate the short and long-run effects of macroeconomic factors on NPLs. The empirical findings show that gross domestic product and public debt have a negative impact on NPLs. On the other hand, we find that the unemployment rate and domestic credit positively influence impaired loans. Finally, we find evidence of the “gamble for resurrection” approach, i.e., Italian banks tend to support “zombie firms”.

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Section: Literature Overviewmentioning

confidence: 99%

Non-Performing Loans and Macroeconomics Factors: The Italian Case

Foglia

2022

Risks

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“…However, no single macroeconomic variable exerts a significant effect on non-performing loans [13]. Kjosevski et al (2021) in their study they examined selected macroeconomic and specific determinants of non-performing loan banks (NPLRs) for a panel of 21 commercial banks from the Baltic States (Estonia, Latvia and Lithuania), using annual data for the period 2005-2016. Empirical results provide evidence that the most important macroeconomic factors affecting NPLs are GDP growth, public debt, inflation and unemployment [14].…”

Section: -1-empirical Findings On the Impact Of Economic Growth On Nplmentioning

confidence: 99%

“…Kjosevski et al (2021) in their study they examined selected macroeconomic and specific determinants of non-performing loan banks (NPLRs) for a panel of 21 commercial banks from the Baltic States (Estonia, Latvia and Lithuania), using annual data for the period 2005-2016. Empirical results provide evidence that the most important macroeconomic factors affecting NPLs are GDP growth, public debt, inflation and unemployment [14]. Nor et al (2021) examined non-performing loan determinants (NPLs) in Asia using a panel data set in 9 countries covering the Middle East, Southeast Asia (SEA) and South Asia over the period 2000 to 2014, and test whether these determinants affect Southeast Asia differently.…”

Section: -1-empirical Findings On the Impact Of Economic Growth On Nplmentioning

confidence: 99%

The Impact of Macroeconomic Factors on Non-performing Loans in the Western Balkans

Gashi

Tafa²,

Bajrami³

2022

Emerg Sci J

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This paper analyzes the relationship of macroeconomic factors to the level of non-performing loans (NPLs) using the econometric models GMM, the Fixed Effect model, and the Random Effect model. This study aims to identify macroeconomic factors at the level of non-performing loans in the Western Balkans, measure their impact on non-performing loans, and thus fill the gap that exists between macroeconomic factors (consisting of economic growth) and those with more impact on NPLs. The methodology used to carry out this research was desk research. We used World Bank data from 2000–2019, processed with STATA software. Results show that macroeconomic factors have an impact on non-performing loans. It also proves that even when interacting with other variables, the level of bad debt has not been completely eliminated, despite economic growth in many countries. Third, throughout the study period, fixed effects estimates show that variables are not significant in a static context. According to the findings, the annual rates of GDP growth, final government consumption, the real interest rate, gross domestic savings, and the unemployment rate all have a favorable impact on NPLs. This research contributes to a deeper understanding of the relationship between macroeconomic factors and non-performing loans in the Western Balkans. Based on this, to help reduce loan risk and bad debt by the proper criteria, we propose a series of policy implications. These implications aim to improve the efficiency of banks in particular and the banking system as a whole. Doi: 10.28991/ESJ-2022-06-05-08 Full Text: PDF

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“…Beck et al (2015) studied NPLs in 75 countries and found that macroeconomic determinants influence NPLs. Foglia (2022) reported a negative relationship between macroeconomic factors and NPLs, positive influences (Gizem and Mehmet, 2021), positive impact (Ahmed et al, 2021) Macroeconomic cyclical indicators (Kjosevski and Petkovski, 2021). The theoretical and empirical evidence regarding the significance of macroeconomic variables in influencing bank NPLs remains unclear.…”

Section: Introductionmentioning

confidence: 99%

Macroeconomic cyclical indicators and bank non-performing loans: does country governance matter in African countries?

Ahiase,

Andriana,

Agbemava

et al. 2023

IJSE

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PurposeThe purpose of this paper is to investigate the influence of macroeconomic cyclical indicators and country governance on bank non-performing loans in African countries.Design/methodology/approachData was collected from the 53 African countries covering 2005–2021. The paper develops an empirical model to examine the impact of country governance in reducing macroeconomic cycle-induced adverse effects on bank credit risk. This research estimates Random Effects models and the General Method of Moment to examine the link between microeconomic and governance factors on bank non-performing loans. Stata version 15.1 was used to conduct panel regression analysis.FindingsThe findings of the study revealed that the generalized method of moments findings contributes valuable insights into the persistence of NPLs over time and the specific effects of variables on NPL levels. The study findings highlight that the debt-to-GDP ratio, unemployment, regulatory quality, government effectiveness and inflation have significant relationships with NPLs, shedding light on their specific contributions to credit risk dynamics.Research limitations/implicationsThe focus on a specific set of determinants for NPLs, which may not capture all the factors that influence NPL levels. Thus, the study did not consider the impact of macroeconomic shocks, such as natural disasters or global economic crises, which can have a significant impact on NPLs.Practical implicationsPolicymakers should prioritize maintaining sustainable debt levels, promoting employment growth and controlling inflation rates to mitigate credit risk and reduce nonperforming loans. Also, enhancing regulatory quality and government effectiveness is crucial in ensuring financial stability and minimizing non-performing loans in Africa.Originality/valueThis paper provides a new possible solution to minimise bank non-performing loans risk by examining interactions of country governance regarding the macroeconomic cycle behaviour.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2022-0729

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Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states

Cited by 22 publications

References 31 publications

Non-Performing Loans and Macroeconomics Factors: The Italian Case

Non-Performing Loans and Macroeconomics Factors: The Italian Case

The Impact of Macroeconomic Factors on Non-performing Loans in the Western Balkans

Macroeconomic cyclical indicators and bank non-performing loans: does country governance matter in African countries?

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