Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies

By Mwanza Nkusu. Social Science Research Network, 2011

649 citations recorded by the source corpus.

We analyze the link between nonperforming loans (NPL) and macroeconomic performance using two complementary approaches. First, we investigate the macroeconomic determinants of NPL in panel regressions and confirm that adverse macroeconomic developments are associated with rising NPL. Second, we investigate the feedback between NPL and its macroeconomic determinants in a panel vector autoregressive (PVAR) model. The impulse response functions (IRFs) attribute to NPL a central role in the linkages between credit market frictions and macrofinancial vulnerability. They suggest that a sharp increase in NPL triggers long-lived tailwinds that cripple macroeconomic performance from several fronts.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/7f60e5c87d004614d2ad81774ae9b2688866f29f

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Citations in the corpus

Economic Determinants of Non-Performing Loans: Perception of Pakistani Bankers (2012, background): “Findings also support the previous study conducted by Nkusu (2011), Vogiazas & Nikolaidou (2011), Bofondi and Ropele (2011).”
Credit risk determinants: Evidence from a cross-country study (2015, background): “A banking crisis may occur following volatility in the macroeconomic environment (Festic et al., 2011; Louzis et al., 2012; Nkusu, 2011) such as a fall in growth, or increases in levels of unemployment, interest rates, and inflation.”
Macroeconomic and Institutional Determinants of Non-performing Loans (2015, background): “The first model in column 1 presents only effects of macroeconomic indicators on level of NPLs.”
Determinants of Non-Performing Loans: The Case of Eurozone (2014, background): “In contrast to Nkusu (2011), the study of Reinout de Bock and Alexander De-myanets (2012) analyzed the determinants of bank asset quality in 25 emerging countries during 1996-2010, by examining only aggregate macroeconomic and credit indicators.”
Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance (2013, background): “Nkusu (2011), who focused on 26 advanced economies in the period of 1998–2009, found that adverse shocks to asset prices, macroeconomic performance and credit to the private sector lead to a worsening of loan quality.”
Bank Asset Quality in Emerging Markets: Determinants and Spillovers (2012, background): “…Gulf Cooperation Council (GCC).8 7 Kaminsky and Reinhart (1999), Borio et al. (2001), Jimenez and Saurina (2006), Lown and Morgan (2006), Carlson et al. (2009), Marcucci and Quagliariello (2009), Espinoza and Prasad (2010), Hartelius (2010), Helbling et al. (2011), Meeks (2011) and Nkusu (2011).”
Micro and Macro Determinants of Non-performing Loan (2013, background): “Among the authors, who have confirmed that adverse macroeconomic developments are associated with the increase in NPL, we can cite the example of research conducted by Nkusu (2011).”
Non-Performing Loans: What Matters in Addition to the Economic Cycle? (2013, positive): “The findings are also in line with the results of Nkusu (2011), who uses panel data techniques on a sample of 26 advanced economies that spans from 1998 to 2009, to quantify the relationship between the quality of banks’ loan portfolio and macrofinancial vulnerabilities.”
Macroeconomic Determinants of the Credit Risk in the Banking System: The Case of the GIPSI (2013, background): “In fact, the increase in the debt burden caused by rising interest rates will lead to a higher rate of nonperforming loans (Aver, 2008; Nkusu, 2011; Louzis et al., 2012).”