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Determinants Of Nonperforming Loans In Central And Eastern European Countries: Macroeconomic Indicators And Credit Discipline

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  • Bogdan-Gabriel MOINESCU

    (Academy of Economic Studies, Money and Banking Department, 6 Piata Romana, Bucharest, 010374)

Abstract

Anticipating the nonperforming loans dynamics on the basis of macroeconomic credit risk models is crucial for shaping adequate economic policy mix to prevent disorderly deleveraging in the banking system. The added value of this paper is twofold. First, we apply reputed conditional risk model referred to as Credit Portfolio View in a regional context to test whether different patterns of registered NPLs during 2003-2011 are driven by domestic economic performances in CEE countries. Second, we turn to dynamic panel regressions with fixed effects to determine whether there are material structural differences among CE Eeconomies in terms of reimbursing behaviour. Econometric results confirm that GDP growth is the prominent macroeconomic explanatory variable of nonperforming loans developments among CEE economies. Moreover, the larger the amplitude and standard deviation of the economic cycle are, the higher the NPL ratio jumps during recession period. Monetary conditions are also important, but to a lesser extent. Although labour market indicators do have informational content for modelling NPLs dynamics, their presence in the multivariate panel regressions is affected by existing strong dependency to economic growth variables. Furthermore, fixed effects were not found statistically relevant, suggesting that there are no major differences in terms of credit discipline across the CEE region. Under this setting, continued refraining from promoting domestic legislative initiatives that would impact the reimbursing behaviour is crucial for avoiding a major disruption in the real economy for many years.

Suggested Citation

  • Bogdan-Gabriel MOINESCU, 2012. "Determinants Of Nonperforming Loans In Central And Eastern European Countries: Macroeconomic Indicators And Credit Discipline," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 47-58, December.
    • Handle: RePEc:aic:revebs:y:2012:i:10:moinescub
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    Cited by:

    1. Petros Golitsis & Athanasios P. Fassas & Anna Lyutakova, 2019. "Credit Risk Determinants: Evidence from the Bulgarian Banking System," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 41-64.
    2. Akinola Ezekiel Morakinyo & Mabutho Sibanda, 2016. "The Determinants of Non-Performing Loans in the MINT Economies," Journal of Economics and Behavioral Studies, AMH International, vol. 8(5), pages 39-55.
    3. Mahmoud Abdelaziz Touny & Mohamed Abdelhameed Shehab, 2015. "Macroeconomic Determinants of Non-Performing Loans: An Empirical Study of Some Arab Countries," American Journal of Economics and Business Administration, Science Publications, vol. 7(1), pages 11-22, May.
    4. Ruja, Catalin, 2014. "Macro Stress-Testing Credit Risk in Romanian Banking System," MPRA Paper 58244, University Library of Munich, Germany.
    5. Imola Drigă, 2017. "Financial Intermediation after the Financial Crisis," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 17(2), pages 43-50.
    6. Nikola Radivojevic & Jelena Jovovic, . "Examining of Determinants of Non-Performing Loans," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-17.
    7. Mirela Monea, 2016. "Performance Indicators from Banking System," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 16(2), pages 69-76.
    8. Morakinyo Akinola & Muller Colette & Sibanda Mabutho, 2018. "Non-Performing Loans, Banking System and Macroeconomy," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 63(2), pages 67-86, August.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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