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Macroeconomic and financial determinants of non-performing loans: Evidence from PIIGS

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  • Panagiotis Magdalinos
  • Ioannis Tsakalos

Abstract

The Eurozone Debt Crisis led to the outbreak of non-performing loans (NPLs). The purpose of this paper is to identify the macroeconomic and financial factors that enhanced the non-performing loans. We compare the impact of financial crisis to the following countries: Italy, Greece, Spain, Portugal, Ireland (PIIGS) and focus on specific parameters which affect the banking sector. We apply panel data analysis to highlight the relation among NPLs and specific parameters: Gross Domestic Product (GDP), unemployment rate, bank liquidity, and the real estate market. Findings confirm the negative correlation between NPLs and the GDP and the housing prices, as well as the positive one with the unemployment rate and the liquidity ratio (LDR).

Suggested Citation

  • Panagiotis Magdalinos & Ioannis Tsakalos, 2021. "Macroeconomic and financial determinants of non-performing loans: Evidence from PIIGS," Bulletin of Applied Economics, Risk Market Journals, vol. 8(2), pages 97-110.
    • Handle: RePEc:rmk:rmkbae:v:8:y:2021:i:2:p:97-110
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    References listed on IDEAS

    as
    1. Podpiera, Jiri & Weill, Laurent, 2008. "Bad luck or bad management? Emerging banking market experience," Journal of Financial Stability, Elsevier, vol. 4(2), pages 135-148, June.
    2. Rinaldi, Laura & Sanchis-Arellano, Alicia, 2006. "Household debt sustainability: what explains household non-performing loans? An empirical analysis," Working Paper Series 570, European Central Bank.
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    More about this item

    Keywords

    Non-performing loans; panel data; macroeconomic factors; financial ratios;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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