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Macroeconomic Determinants of Non-Performing Loans: An Empirical Study of Some Arab Countries

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  • Mahmoud Abdelaziz Touny
  • Mohamed Abdelhameed Shehab

Abstract

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.

Suggested Citation

  • Mahmoud Abdelaziz Touny & Mohamed Abdelhameed Shehab, 2015. "Macroeconomic Determinants of Non-Performing Loans: An Empirical Study of Some Arab Countries," American Journal of Economics and Business Administration, Science Publications, vol. 7(1), pages 11-22, May.
    • Handle: RePEc:abk:jajeba:ajebasp.2015.11.22
    DOI: 10.3844/ajebasp.2015.11.22
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    3. Patrick Omoruyi Eke & B. Uzoma Achugamonu & Simon Yunisa & Godswill Osagie Osuma, 2020. "Macroeconomic risks and financial sector stability: the Nigerian case," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(3), pages 233-249, September.
    4. Ptasica Tatjana, 2019. "Modeling the influence of inflation on the level of non-performing loans in Cyprus commercial banks," Technology audit and production reserves, 1(45) 2019, Socionet;Technology audit and production reserves, vol. 1(5(45)), pages 36-38.
    5. Serpil Kılıç Depren & Mustafa Tevfik Kartal, 2021. "Prediction on the volume of non‐performing loans in Turkey using multivariate adaptive regression splines approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6395-6405, October.
    6. Moayad Al Rasasi & Soleman Alsabban, 2024. "On the Determinants of Loan Default in the Saudi Banking System," Applied Economics and Finance, Redfame publishing, vol. 11(2), pages 1-13, December.

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