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Bank-specific and macroeconomic determinants of non-performing loans in the Republic of Macedonia: Comparative analysis of enterprise and household NPLs

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  • Jordan Kjosevski
  • Mihail Petkovski
  • Elena Naumovska

Abstract

The purpose of this paper is to explore the influence of bank-specific and macroeconomic determinants of all non-performing loans (NPLs) to enterprises and households in the Republic of Macedonia. The analysis is performed for the whole banking sector for the period 2003Q4 to 2014Q4, by applying the Autoregressive Distributed Lag Modelling Approach (ARDL), the co-integration model implementing quarterly time series. The results of the research indicate that the profitability of banks, the growth of loans to enterprises and to households respectively, as well as the growth of GDP, all have a negative impact, while banks’ solvency and unemployment have a positive impact on the rise of non-performing loans in both models. In addition, regarding enterprises, we found that the exchange rate has a positive and statistically significant impact on the level of NPLs, while inflation has a negative and statistically significant impact on the increase in non-performing loans to households. The main contribution of this paper is that the results obtained by econometric analysis may be used for forecasting non-performing loans several years in the future, as well as for stress-testing both the entire banking system and the individual banks operating in the Republic of Macedonia.

Suggested Citation

  • Jordan Kjosevski & Mihail Petkovski & Elena Naumovska, 2019. "Bank-specific and macroeconomic determinants of non-performing loans in the Republic of Macedonia: Comparative analysis of enterprise and household NPLs," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 1185-1203, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:1185-1203
    DOI: 10.1080/1331677X.2019.1627894
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    Cited by:

    1. Anju Goswami & Pooja Malik, 2024. "Identifying Financial Performance Drivers in the Indian Banking Sector During the COVID-19 Crisis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 22(3), pages 667-719, September.
    2. Ante Dzidic & Igor Zivko & Anela Colak, 2022. "Macroeconomic Factors Of Non-Performing Loans: The Case Of Bosnia And Herzegovina," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 31(2), pages 421-438, december.
    3. Nam Pham Hai & Chi Le Ha Diem, 2024. "Credit risk of Vietnamese commercial banks: does capital structure matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(3), pages 272-283, September.
    4. Aleksandra Ostrowska, 2023. "Makroekonomiczne determinanty jakości kredytów dla sektora niefinansowego w Polsce," Bank i Kredyt, Narodowy Bank Polski, vol. 54(5), pages 541-556.
    5. Swati Singh & Manpreet Arora, 2023. "Examining and analysing the determinants of non-performing assets in public and private sector banks in India," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 25(4), pages 553-568.

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