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Approaches to the Impact of Non-Performing Loans on the Romanian Economy

Author

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  • Costinela Fortea

    (Dunarea de Jos University of Galati, Romania)

  • Monica Laura Zlati

    (Dunarea de Jos University of Galati, Romania)

  • Valentin Marian Antohi

    (Dunarea de Jos University of Galati, Romania and Transilvania University of Brasov, Romania)

Abstract

Non-performing loans (NPLs) are a financial item that affects bank profitability by reducing banks' income from lending and increasing non-performing loans at the industry level. This phenomenon is associated with a decrease in lenders' financial capacity due to inflation and exchange rate instability. We aim to analyze the impact of non-performing loans on the Romanian economy based on an econometric model for the period 2010-2021 using financial indicators on bank non-performing loans in correlation with macroeconomic indicators such as unemployment, inflation, GDP deflator and general government final consumption expenditure. The methods used consist of literature review on non-performing loans, consolidation of a database, application of econometric modelling techniques using linear regression. The results of the study support the possibilities of reducing the negative impact of non-performing loans through macroeconomic recovery and smart financial allocation.

Suggested Citation

  • Costinela Fortea & Monica Laura Zlati & Valentin Marian Antohi, 2024. "Approaches to the Impact of Non-Performing Loans on the Romanian Economy," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 148-155.
    • Handle: RePEc:ddj:fseeai:y:2024:i:1:p:148-155
    DOI: 10.35219/eai15840409401
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    References listed on IDEAS

    as
    1. Ari, Anil & Chen, Sophia & Ratnovski, Lev, 2021. "The dynamics of non-performing loans during banking crises: A new database with post-COVID-19 implications," Journal of Banking & Finance, Elsevier, vol. 133(C).
    2. Karadima, Maria & Louri, Helen, 2020. "Non-performing loans in the euro area: Does bank market power matter?," International Review of Financial Analysis, Elsevier, vol. 72(C).
    3. Yilmaz Bayar, 2019. "Macroeconomic, Institutional and Bank-Specific Determinants of Non-Performing Loans in Emerging Market Economies: A Dynamic Panel Regression Analysis," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 8(3), pages 95-110.
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