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Industry Specific Shocks and Non-Performing Loans in Barbados

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  • Anton Belgrave
  • Kester Guy
  • Mahalia Jackman

Abstract

Despite the vast body of literature on the relationship between the macroeconomic environment and non-performing loans (NPLs), an area which has been neglected thus far, is a comparative study of the response of NPLs to industry-specific income shocks. Using panel VAR methods, this study investigates the sensitivity of NPLs to shocks to six industries in Barbados. The results suggest that there is some degree of heterogeneity in the response of NPL to these shocks. For instance, there is no evidence to suggest that shocks to the agriculture and manufacturing sectors — the two smallest sectors — affect NPLs. In contrast, our results suggest that positive shocks to the output of the distribution, professional and tourism industries lead to an overall reduction in the level of stress in the financial system — though the timing of responses differs across each industry.

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  • Anton Belgrave & Kester Guy & Mahalia Jackman, 2012. "Industry Specific Shocks and Non-Performing Loans in Barbados," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 123-133, December.
    • Handle: RePEc:rfb:journl:v:04:y:2012:i:2:p:123-133
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    2. Ms. Kimberly Beaton & Ms. Alla Myrvoda & Shernnel Thompson, 2016. "Non-Performing Loans in the ECCU: Determinants and Macroeconomic Impact," IMF Working Papers 2016/229, International Monetary Fund.

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