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The Roots of the Banking Crisis in the New EU Member States: A Panel Regression Approach

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  • Festic, Mejra

    ()
    (EPF - Faculty of Economics and Business, University of Maribor; EIPF - Economic Institute, Ljubljana. SLOVENIA)

  • Kavkler, Alenka

    ()
    (EPF - Faculty of Economics and Business, University of Maribor; EIPF - Economic Institute, Ljubljana. SLOVENIA)

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    Abstract

    We contributed to the empirical evidence of the impact of macroeconomic environment on the non-performing loans (NPL) ratio dynamics by analyzing the panel model with fixed effects, the model with random effects and instrumental variable regressions to control for a potential endogeneity problem. Economic and consumption growth proved to be positively correlated with the business cycle in the ten new EU member states (NMS-10), which raised the quality of the loan portfolio. Compliance with the Basel Core Principles was shown to improve the NPL ratio dynamics.

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    Bibliographic Info

    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2012)
    Issue (Month): 1 (March)
    Pages: 20-40

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    Handle: RePEc:rjr:romjef:v::y:2012:i:1:p:20-40

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    Related research

    Keywords: cyclicality; systemic risk; overheating economies;

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    1. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    2. Richard Podpiera, 2004. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Working Papers 04/204, International Monetary Fund.
    3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    4. Khemraj, Tarron, 2008. "Excess Liquidity and the Foreign Currency Constraint: The Case of Monetary Management in Guyana," MPRA Paper 53127, University Library of Munich, Germany.
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    9. Festic, Mejra & Kavkler, Alenka & Repina, Sebastijan, 2011. "The macroeconomic sources of systemic risk in the banking sectors of five new EU member states," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 310-322, February.
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