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The Banking Sector and Macroeconomic Performance in Central European Economies

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Abstract

We present empirical evidence on the macroeconomic variables affecting non-performing loan (NPL) ratios in five central European economies (CEEs). We reach four main conclusions. First, a slowdown in economic activity can be expected to deteriorate the NPL ratios in the CEEs. Second, in four out of the five countries, foreign direct investment growth appears to improve NPL ratios. Third, an increase in real interest rates has a negative impact on the financial position of borrowers and loan portfolio quality in all the five CEEs. Fourth, in a majority of CEEs, increasing credit to the private sector increases the NPL ratio, indicating a need to strengthen the supervision of banks’ lending activities.

Suggested Citation

  • Merja Festiæ & Jani Bekõ, 2008. "The Banking Sector and Macroeconomic Performance in Central European Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(03-04), pages 131-151, May.
    • Handle: RePEc:fau:fauart:v:58:y:2008:i:3-4:p:131-151
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    Cited by:

    1. Kristina Kocisova & Martina Pastyriková, 2020. "Determinants of non-performing loans in European Union countries," Proceedings of Economics and Finance Conferences 10913085, International Institute of Social and Economic Sciences.
    2. Janda, Karel & Van Tran, Quang & Zetek, Pavel, 2014. "Influence of External Funding on Microfinance Performance," MPRA Paper 58170, University Library of Munich, Germany.
    3. Nenad Milojević, 2014. "Optimal Banking and Other Financial Business for the Economic Growth of Serbia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 3(2), pages 61-83.
    4. Albulena Shala & Valentin Toçi & Arben Mustafa, 2022. "Macroeconomic, Structural, and Bank-specific Determinants of Non-performing Loans in Central and Eastern Europe," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(5), pages 411-429, May.
    5. Aleš Melecký & Martin Melecký & Monika Šulganová, 2015. "Úvěry v selhání a makroekonomika: modelování systémového kreditního rizika v České republice [Non-Performing Loans and The Macroeconomy: Modeling the Systemic Credit Risk in the Czech Republic]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(8), pages 921-947.
    6. Janda, Karel & Tran, Quang & Zetek, Pavel, 2014. "Vliv externího financování na mikrofinanční rozvoj - makro perspektiva [Influence of external funding on microfinance performance - macro perspective]," MPRA Paper 58166, University Library of Munich, Germany.

    More about this item

    Keywords

    non-performing loans; systemic risk; macro environment; economic growth;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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