MANAS Sosyal Araştırmalar Dergisi The Macro Economic Drivers of Non-Performing Loans (NPL): Evidence from Selected Countries with Heterogeneous Panel Analysis (original) (raw)
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MANAS Sosyal Araştırmalar Dergisi, 2021
NPL could be treated as a critical issue in the financial systems of countries of which have bank-based infrastructures since NPL restrict the credit providing capacity of banks. Hence, necessary financing sources for economic growth and development could not be provided. In this context, the study aims to research the drivers of NPL in selected 23 countries. 4 independent drivers and yearly data between 2006 and 2018 are analyzed by using heterogeneous panel analysis. The empirical findings reveal that (i) credits, gross domestic products (GDP), and savings have statistically significant negative effect whereas foreign exchange rates (FER) have a statistically insignificant positive effect on NPL for the overall panel; (ii) 1% increase in credits reduces NPL by approximately 2%; (iii); FER have statistically significant effects in some countries at the country base; (iv) negative coefficients for credits, savings, and GDP are consistent in both overall panel and country base.
Key Determinants of Non-performing Loans: New Evidence from a Global Sample
Open Economies Review, 2015
Using a novel panel data set we study the macroeconomic determinants of non-performing loans (NPLs) across 75 countries during the past decade. According to our dynamic panel estimates, the following variables are found to significantly affect NPL ratios: real GDP growth, share prices, the exchange rate, and the lending interest rate. In the case of exchange rates, the direction of the effect depends on the extent of foreign exchange lending to unhedged borrowers which is particularly high in countries with pegged or managed exchange rates. In the case of share prices, the impact is found to be larger in countries which have a large stock market relative to GDP. These results are robust to alternative econometric specifications.
Future Business Journal
The study empirically investigates selected macroeconomic determinants of non-performing loans (NPLs) for a panel of 8 South Asian Association for Regional Cooperation countries (Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka), using annual data for the period 2008–2019. To examine the association, this study, primarily, conducted the OLS model, fixed effect estimates, and random effect estimates and, eventually, applied robust fixed effect estimates to resolve the problem of heteroscedasticity. The empirical findings confirmed the previous findings, indicating a significant positive association with the government budget balance and a significant inverse relationship with GDP, sovereign debt, inflation rate, and money supply. To reduce the aggregate NPLs in the South Asian Association for Regional Cooperation economy, the respective country’s government should identify the financial sector’s vulnerabilities and, thereby, emphasize boosting the econ...
How Do Bank-Specific Factors Impact Non-Performing Loans: Evidence from G20 Countries
Journal of Central Banking Theory and Practice
Banking is important for the stability and success of the economy. The success of the banking system on financial intermediation in developing countries is directly affected by non-performing loans (NPLs). Many factors can be treated as NPL determinants. Accordingly, the factors that explain NPLs contain very important information for banks. To this end, the study is an attempt to examine various banking factors that affect NPLs with respect to developing economies. In this study, the bank-specific and macroeconomic factors affecting the NPL rates were analysed through the dynamic panel data analysis. Analyses were made using described G20 countries between 1998 and 2017. The results indicate that the lagged value of NPLs, return on equity, credit growth and credit costs have a significant positive relationship with NPLs, while capital adequacy and GDP have a negative association with NPLs. The results confirm that if the bank-specific conditions change, the credit quality and bank ...
Examining of Determinants of Non-Performing Loans
Prague Economic Papers, 2017
In this paper the authors examine the determinants of NPL ratio using a cross-county analysis from the sample of 25 emerging countries. Using the panel data approach, determinants of NPL are analysed for the period from 2000 to 2011. The main aim of this paper is to draw a relevant econometric model, to demonstrate the impact of independent variables on the dependent variable by using static and dynamic model estimation techniques. The results show that NPLs rate can be mainly explained by crucial macroeconomic factors, such as the GDP and inflation rate, and bank-specific factors, such as ROA, CAP and lagged NPLs rate.
Macroeconomic Determinants of Non-performing Loans: From Turkish Banking Sector
2018
The issue of non-performing loans is one of the factors that reflect the soundness of the banking sector. The main objective of this study is to identify macroeconomic determinants of non-performing loans in some Arab countries through the period 2000-2012 using the dynamic panel data approach. The outcomes of this paper suggest that inflation rate has a negative impact on NPLs, whereas improvement in macroeconomic and financial conditions seems to have a negative impact on the level of NPLs. Regarding the impact of the global financial crisis, the results show that the crisis had a negative impact on the level of NPLs. With regard to household consumption, the outcomes point out to mixed results where this effect seems to be negative in non-petroleum countries but positive in petroleum countries, whereas increasing of government spending is associated with low level of NPLs in both groups of countries. Moreover, an increase of the aggregate debt burden has a positive impact on the level of bad loans whereas expansionary monitory policy and improvement of terms of trade in petroleum countries have a significant negative effect on NPLs but this effect is not clear in non-petroleum countries.
Macroeconomic Determinants of Non-Performing Loans: An Empirical Study of Some Arab Countries
The issue of non-performing loans is one of the factors that reflect the soundness of the banking sector. The main objective of this study is to identify macroeconomic determinants of non-performing loans in some Arab countries through the period 2000-2012 using the dynamic panel data approach. The outcomes of this paper suggest that inflation rate has a negative impact on NPLs, whereas improvement in macroeconomic and financial conditions seems to have a negative impact on the level of NPLs. Regarding the impact of the global financial crisis, the results show that the crisis had a negative impact on the level of NPLs. With regard to household consumption, the outcomes point out to mixed results where this effect seems to be negative in non-petroleum countries but positive in petroleum countries, whereas increasing of government spending is associated with low level of NPLs in both groups of countries. Moreover, an increase of the aggregate debt burden has a positive impact on the level of bad loans whereas expansionary monitory policy and improvement of terms of trade in petroleum countries have a significant negative effect on NPLs but this effect is not clear in non-petroleum countries.
International Journal of Economics and Business Research, 2019
The issue of non-performing loans is one of the factors that reflect the soundness of the banking sector. The main objective of this study is to identify macroeconomic determinants of non-performing loans in some Arab countries through the period 2000-2012 using the dynamic panel data approach. The outcomes of this paper suggest that inflation rate has a negative impact on NPLs, whereas improvement in macroeconomic and financial conditions seems to have a negative impact on the level of NPLs. Regarding the impact of the global financial crisis, the results show that the crisis had a negative impact on the level of NPLs. With regard to household consumption, the outcomes point out to mixed results where this effect seems to be negative in non-petroleum countries but positive in petroleum countries, whereas increasing of government spending is associated with low level of NPLs in both groups of countries. Moreover, an increase of the aggregate debt burden has a positive impact on the level of bad loans whereas expansionary monitory policy and improvement of terms of trade in petroleum countries have a significant negative effect on NPLs but this effect is not clear in non-petroleum countries.
Journal of Emerging Economies and Islamic Research
Non-performing loans has become an important part of commercial banking of a country. This paper empirically tests the macroeconomic and bank-specific covariates of non-performing loans for a panel of 13 commercial banks for period of 2003-2012. Using fixed effects with Driscoll and Kraay standard errors, the influence of macroeconomic and bank-specific covariates is found meaningful. Recommendations include the policy steps to complement the sound financial system with a healthy macroeconomic environment to reduce non-performing loans in commercial banks in Pakistan. Moreover, need is highlighted for a policy approach with emphasis on the apposite credit culture and lending policy designed with pertinent economic and financial factors.
2019
Using panel data approach in the Pakistan banking sector over the period 2010 to 2016, we examine the bank-specific and macroeconomic determinants of non-performing loans. We use quantitative research design with OLS random effect model. Furthermore, we use various regression and correlation analysis in this study. We find that rise in capital adequacy ratio, bank size, GDP growth rate, and inflation, reduces the non-performing loans (NPL) ratio. Our results also show that a rise in loan loss provisions enhances the NPL ratio. Our results suggest that banks with poor asset-quality can sabotage the growth of fiscal as well as the economic sector. Outcomes of the study emphasis on the need to clear-out the NPLs to keep financial sector sound. NPLs can cause high loan loss provisions which affect the capitalization of banks that ultimately impacts fiscal and economic growth. Bank supervisory agencies should therefore pay attention to monitory and macroeconomic policies of the banks. T...