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Financial Stability and Innovation: The Role of Non-Performing Loans

Author

Listed:
  • Massimo Arnone

    (Department of Economics and Business, University of Catania, 95124 Catania, Italy)

  • Alberto Costantiello

    (Department of Management, Finance and Technology (MFT), Lum University “Giuseppe Degennaro”, 70010 Casamassima, Italy)

  • Angelo Leogrande

    (Department of Management, Finance and Technology (MFT), Lum University “Giuseppe Degennaro”, 70010 Casamassima, Italy)

  • Syed Kafait Hussain Naqvi

    (School of Economics, International Islamic University Islamabad, Islamabad 44000, Pakistan)

  • Cosimo Magazzino

    (Department of Political Science, Roma Tre University, 00154 Rome, Italy
    Economic Research Center, Western Caspian University, Baku 1001, Azerbaijan)

Abstract

This study analyses the relationship between non-performing loans (NPLs) and innovation systems at a global level. The data were obtained from the World Bank and the Global Innovation Index over the period 2013–2022 for 149 countries. The k-means algorithm was used to verify the presence of clusters in the data. Since k-means is an unsupervised machine-learning algorithm, we compared the Silhouette coefficient with the Elbow method to find an optimization. The results show that the optimal number of clusters is three, as suggested using the Elbow Method. Furthermore, a panel data analysis was conducted. Results show that the level of NPLs is positively associated with cultural and creative services exports as a percentage of total trade and innovation input sub-index and negatively associated with the Hirsch Index, ICT services exports as a percentage of total trade, ICT services imports as a percentage of total trade, and information and communication technologies.

Suggested Citation

  • Massimo Arnone & Alberto Costantiello & Angelo Leogrande & Syed Kafait Hussain Naqvi & Cosimo Magazzino, 2024. "Financial Stability and Innovation: The Role of Non-Performing Loans," FinTech, MDPI, vol. 3(4), pages 1-41, October.
    • Handle: RePEc:gam:jfinte:v:3:y:2024:i:4:p:27-536:d:1498226
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