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The Impact of Macroeconomic Indicators on the Nonperforming Loans (Case of Iran)

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  • Valipour Pasha , Mohammad

    (Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI))

  • Bastanzad , Hossein

    (Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI))

Abstract

Financial statements of nineteen mature banks have been patronized to examine the impact of macroeconomic indicators and bank-specific determinants on the NPLs ratio through Quantile and Panel Data regression approaches. The impact of macroeconomic indicators on credit risk is statistically estimated for banking network via two directions. First, different quantiles are econometrically calculated, assessed and compared during 2007-12. Second, the Panel Data estimation is utilized in the same way to verify the outcomes of quantile regression and to check the robustness. Results indicate that the impact of real money supply on the banks' NPLs in 25%, 50%, and 75% of data is positive and significant in line with empirical evidence. The coefficients of the other variables (including the ratio of individual banks' performing loans to total deposits, individual banks' performing loans to total loans ratio, as well as GDP would be positively significant as well. The real interest rate has negatively-significantly driven NPLs. The banks' NPLs are generally exacerbated by the impact of higher real money supply over the long run, real interest rate in the money market and upper return in the assets market mainly because of the negative-inflationary transmission effect.

Suggested Citation

  • Valipour Pasha , Mohammad & Bastanzad , Hossein, 2015. "The Impact of Macroeconomic Indicators on the Nonperforming Loans (Case of Iran)," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(1), pages 63-84, January.
    • Handle: RePEc:mbr:jmonec:v:10:y:2015:i:1:p:63-84
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    References listed on IDEAS

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    More about this item

    Keywords

    Nonperforming loans; Macroeconomic indicators; Quantile regression; Panel data;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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