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The Trade Deficit and Banking Sector Results in Romania and Bulgaria

  • 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)

Registered author(s):

    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.

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    Article provided by Academy of Economic Studies - Bucharest, Romania in its journal The AMFITEATRU ECONOMIC journal.

    Volume (Year): 12 (2010)
    Issue (Month): 27 (February)
    Pages: 199-213

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    Handle: RePEc:aes:amfeco:v:12:y:2010:i:27:p:199-213
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