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Estimating the Impact of Credit Risk Determinants in two Southeast European Countries: A Non-Linear Structural VAR Approach

Author

Listed:
  • Michail Karoglou

    ("Aston Business School, Economics and Strategy Group ")

  • Kostas Mouratidis

    (University of Sheffield)

  • Sofoklis Vogiazas

    (Black Sea Trade and Development Bank)

Abstract

"We study the impact of credit risk determinants on the Romanian and Bulgarian banking systems using a structural Markov Regime-Switching vector autoregressive (MRS-SVAR) analysis. To capture changes in the domestic macroeconomic conditions as well as the spillover effects from the Greek crisis we account for endogenous breaks in the mean and/or volatility dynamics. Our empirical results suggest that an increase of interest rate also increases the Romanian and Bulgarian credit risk in the short-run while in the medium and long-run it reduces it. We also find evidence of spillover effects from the Greek crisis on both the Romanian and Bulgarian banking system which, interestingly, are imminent in the low volatility regime. "

Suggested Citation

  • Michail Karoglou & Kostas Mouratidis & Sofoklis Vogiazas, 2018. "Estimating the Impact of Credit Risk Determinants in two Southeast European Countries: A Non-Linear Structural VAR Approach," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 10(1), pages 55-74, January.
    • Handle: RePEc:ren:journl:v:10:y:2018:i:1:p:55-74
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    Citations

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    Cited by:

    1. Petros Golitsis & Athanasios P. Fassas & Anna Lyutakova, 2019. "Credit Risk Determinants: Evidence from the Bulgarian Banking System," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 41-64.

    More about this item

    Keywords

    credit risk; structural VAR; breaks; Markov Regime Switching;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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