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Government failures and non-performing loans in Asian countries

Author

Listed:
  • Maria Daniela Giammanco
  • Lara Gitto
  • Ferdinando Ofria

Abstract

Purpose - Non-performing loans (NPLs) may determine an overall weakness of the banking system within a country. The purpose of the present study is to analyze the impact of government failures on NPLs in Asian countries in the time span 2000–2020. The variables employed as proxies of government failures are public debt as % of gross domestic product (GDP) and a government ineffectiveness index proposed by the World Bank. Design/methodology/approach - The econometric approach employed is a panel generalised time series (GLS) model with heteroskedasticity and autocorrelation specific to each panel. Findings - The results confirm that public debt as % of GDP and governmental ineffectiveness impacted significantly on NPLs for Asian countries in the observed period. Originality/value - The literature offers similar results only for some individual Asian countries, while a wider analysis is lacking for Asian macroareas. The present paper considers 31 Asian countries, and supports the idea that a healthy financial sector is correlated to institutional quality and political regime. Hence, policy makers are advised to monitor governance indicators to reduce NPLs.

Suggested Citation

  • Maria Daniela Giammanco & Lara Gitto & Ferdinando Ofria, 2022. "Government failures and non-performing loans in Asian countries," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 50(6), pages 1158-1170, October.
    • Handle: RePEc:eme:jespps:jes-06-2022-0348
    DOI: 10.1108/JES-06-2022-0348
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    Citations

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    Cited by:

    1. Karim Farag & Taha Kassem & Yasmine Ramzy, 2023. "The Crucial Macroeconomic and Microeconomic Determinants of Retail and Corporate Credit Risks," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(2), pages 30-41.
    2. Shasnil Avinesh Chand & Ronald Ravinesh Kumar & Peter Josef Stauvermann, 2023. "Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation," JRFM, MDPI, vol. 16(10), pages 1-35, October.

    More about this item

    Keywords

    Non-performing loans (NPLs); Government failures; Government ineffectiveness; Public debt; Asian countries; C23; D53; G21; H63; N25;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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