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Key Factors of Non-Performing Loans in Baltic and Scandinavian Countries: Lessons Learned in the Last Decade

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  • Kupčinskas Kazys
  • Paškevičius Arvydas

    (Faculty of Economics, Vilnius University, Sauletekio Ave. 9, LT-10222Vilnius, Lithuania)

Abstract

A cross-country panel data regression was performed for non-performing loans (NPL) in Denmark, Estonia, Finland, Latvia, Lithuania and Sweden covering a period of years 1998-2014. The main objective was to determine the major factors that were driving the NPL in the selected countries. Also, we expected to draw the differences in the banking industry between emerging economies in the Baltic countries and Western economies in the Scandinavian region. The selected variables were banking industry-related (net interest margin, ROA, ROE) and macroeconomic variables (GDP growth, RE prices, Unemployment), of which the majority is included as the Financial Soundness Indicators by the IMF. Key findings of the research show that NPL in both regions were mostly dependent on GDP growth and Unemployment, whereas the banking industry variable ROA had a very moderate effect only on a country level. The research is contributing to a better understanding of financial stability in the banking industry during the last decade, and it may have possible implications for the macroprudential policy.

Suggested Citation

  • Kupčinskas Kazys & Paškevičius Arvydas, 2017. "Key Factors of Non-Performing Loans in Baltic and Scandinavian Countries: Lessons Learned in the Last Decade," Ekonomika (Economics), Sciendo, vol. 96(2), pages 43-55, February.
    • Handle: RePEc:vrs:ekonom:v:96:y:2017:i:2:p:43-55:n:3
    DOI: 10.15388/ekon.2017.2.10994
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    References listed on IDEAS

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    1. Roland Beck & Petr Jakubik & Anamaria Piloiu, 2015. "Key Determinants of Non-performing Loans: New Evidence from a Global Sample," Open Economies Review, Springer, vol. 26(3), pages 525-550, July.
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    4. Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206, March.
    5. Artashes Karapetyan, 2016. "The risk-taking channel of monetary policy in Norway," Working Paper 2016/5, Norges Bank.
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    Keywords

    non-performing loans; credit risk;

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