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The Trade Deficit and Banking Sector Results in Romania and Bulgaria

Author

Listed:
  • Alenka Kavkler

    () (Faculty of Economics and Business, University of Maribor, Slovenia and EIPF - Economic Institute, Ljubljana, Slovenia)

  • Mejra Festić

    (Faculty of Economics and Business, University of Maribor, Slovenia and EIPF - Economic Institute, Ljubljana, Slovenia)

Abstract

We tested for the significance of macroeconomic variables that condition non-performing loan ratios. Our estimates for Bulgaria and Romania support the hypothesis that the growth of available finance might harm banking performance and deteriorate NPL dynamics, most probably due to the overheating of economies. Since we confirmed that the dynamics of net exports of these economies deteriorated the NPL ratio, the weakening of growth in export-oriented industries could lead to economic contraction with a direct impact on the sustainability of banking-sector results in these countries. Large current account deficits are typical for emerging markets and do not pose a problem as long as they are caused by the importing of capital goods, and, if future export growth is strong enough to reimburse foreign debt. Structural dependence on external financing - which is in part a by-product of the effect of low levels of internal saving - have led to large current account deficits and financial instability.

Suggested Citation

  • Alenka Kavkler & Mejra Festić, 2010. "The Trade Deficit and Banking Sector Results in Romania and Bulgaria," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 12(27), pages 199-213, February.
  • Handle: RePEc:aes:amfeco:v:12:y:2010:i:27:p:199-213
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eftychia Nikolaidou & Sofoklis Vogiazas, 2014. "Credit Risk Determinants for the Bulgarian Banking System," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(1), pages 87-102, February.
    2. repec:kap:iaecre:v:20:y:2014:i:1:p:87-102 is not listed on IDEAS

    More about this item

    Keywords

    cyclicality; non-performing loans; systemic risk; asset quality; economic growth;

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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