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The Up-Coming Crisis and the Banking Sector in the Baltic States

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  • Mejra Festić
  • Sebastijan Repina
  • Alenka Kavkler
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    Abstract

    We tested for the significance of macroeconomic variables that condition nonperforming loan (NPL) ratios. The hypothesis of procyclicality between economic activity and improving NPL ratio in the Baltic States was proved. The increased economic activity improved the NPL ratio. Due to a high share of loans denominated in a foreign currency and the fact of productivity gains in the tradable sector, the appreciation of the real exchange rate contributed to an improvement in NPL ratio. The procyclicality of banking sector performance and high economic activities growth could be a signal of an economy overheating in the Baltics.

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    File URL: http://www.sjes.ch/papers/2009-III-2.pdf
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    Bibliographic Info

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 145 (2009)
    Issue (Month): III (September)
    Pages: 269-291

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    Handle: RePEc:ses:arsjes:2009-iii-2

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    Related research

    Keywords: cyclicality; non-performing loans; systemic risk; asset quality;

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    References

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    1. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February.
    2. Evens SALIES & Peter MOFFATT, 2004. "A note on the modelling of hyper-inflations," Econometrics 0406002, EconWPA.
    3. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
    4. Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
    5. Esaka, Taro, 2003. "Panel unit root tests of purchasing power parity between Japanese cities, 1960-1998: disaggregated price data," Japan and the World Economy, Elsevier, vol. 15(2), pages 233-244, April.
    6. Iwaisako, Tokuo, 2004. "Stock Index Autocorrelation and Cross-autocorrelations of Size-sorted Portfolios in the Japanese Market," Discussion Paper Series a448, Institute of Economic Research, Hitotsubashi University.
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    Cited by:
    1. Dobromił Serwa, 2013. "Measuring Non-Performing Loans During (and After) Credit Booms," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 5(3), pages 163-183, September.

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