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Non-performing loans: what matters in addition to the economic cycle?

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  • Beck, Roland
  • Jakubik, Petr
  • Piloiu, Anamaria

Abstract

Using a novel panel data set we study the macroeconomic determinants of nonperforming loans (NPLs) across 75 countries during the past decade. According to our dynamic panel estimates, the following variables are found to significantly affect NPL ratios: real GDP growth, share prices, the exchange rate, and the lending interest rate. In the case of exchange rates, the direction of the effect depends on the extent of foreign exchange lending to unhedged borrowers which is particularly high in countries with pegged or managed exchange rates. In the case of share prices, the impact is found to be larger in countries which have a large stock market relative to GDP. These results are robust to alternative econometric specifications. JEL Classification: G21, G28, G32, F34

Suggested Citation

  • Beck, Roland & Jakubik, Petr & Piloiu, Anamaria, 2013. "Non-performing loans: what matters in addition to the economic cycle?," Working Paper Series 1515, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20131515
    Note: 597822
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    credit risk; currency mismatches; non-performing loans;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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