IDEAS home Printed from https://ideas.repec.org/a/ers/ijfirm/v14y2024i2p103-112.html

Economic Growth and Loans with Problems: The Case of Albania

Author

Listed:
  • Xhuljeta Mecaj
  • Brunilda Lufi

Abstract

Purpose: According to economic theories and empirical literature, it turns out that the growth of gross domestic product affects the level of non-performing loans. This study aims to analyze the relationship between economic growth and non-performing loans for the period 2000-2020. Design/Methodology/Approach: To achieve this objective, we have used data from the Bank of Albania. To analyze this relationship in more detail we have estimated the regression model between the NPL level and economic growth as an independent variable with 1 and 2 time lags. Findings: If we refer to the series trends the connection seems to be negative. To show we calculate the correlation coefficient between the two variables. For the variables NPL and GDP growth we used the ADF test on stationarity and beyond we see if the series converge between them using the Johansen test. Practical Implications: Based on this analysis, the study will show whether a supportive macroeconomic environment is needed to stimulate economic growth by helping to reduce the levels of non-performing loans. Originality/Value: It is proved that as long as the economy is stable and banks are profitable and have adequate capital, non-performing loans are at an appropriate level for banks.

Suggested Citation

  • Xhuljeta Mecaj & Brunilda Lufi, 2024. "Economic Growth and Loans with Problems: The Case of Albania," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 14(2), pages 103-112.
    • Handle: RePEc:ers:ijfirm:v:14:y:2024:i:2:p:103-112
    as

    Download full text from publisher

    File URL: https://journalfirm.com/journal/392/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ivan Alves, 2005. "Sectoral fragility: factors and dynamics," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 450-80, Bank for International Settlements.
    2. Castrén, Olli & Dées, Stéphane & Zaher, Fadi, 2008. "Global macro-financial shocks and expected default frequencies in the euro area," Working Paper Series 875, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tomas Konecny & Oxana Babecka-Kucharcukova, 2016. "Credit Spreads and the Links between the Financial and Real Sectors in a Small Open Economy: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(4), pages 302-321, August.
    2. Chau H. A. Le, 2016. "Macro-financial linkages and bank behaviour: evidence from the second-round effects of the global financial crisis on East Asia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 365-387, December.
    3. Martin Guth, 2022. "Predicting Default Probabilities for Stress Tests: A Comparison of Models," Papers 2202.03110, arXiv.org.
    4. Ismail Tijjani Idris & Sabri Nayan, 2016. "The Moderating Role of Loan Monitoring on the Relationship between Macroeconomic Variables and Non-performing Loans in Association of Southeast Asian Nations Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 402-408.
    5. repec:dau:papers:123456789/10353 is not listed on IDEAS
    6. Mr. Jorge A Chan-Lau, 2006. "Fundamentals-Based Estimation of Default Probabilities - A Survey," IMF Working Papers 2006/149, International Monetary Fund.
    7. Bank for International Settlements, 2018. "Towards a sectoral application of the countercyclical capital buffer: A literature review," BCBS Working Papers 32, Bank for International Settlements.
    8. Evgenidis, Anastasios & Tsagkanos, Athanasios, 2017. "Asymmetric effects of the international transmission of US financial stress. A threshold-VAR approach," International Review of Financial Analysis, Elsevier, vol. 51(C), pages 69-81.
    9. Dale F. Gray & Robert C. Merton & Zvi Bodie, 2007. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability," NBER Working Papers 13607, National Bureau of Economic Research, Inc.
    10. Bermingham, Colin & Conefrey, Thomas, 2014. "The Irish macroeconomic response to an external shock with an application to stress testing," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 454-470.
    11. Wilmar Cabrera & Javier Gutiérrez Rueda & Juan Carlos Mendoza, 2012. "Credit Risk Stress Testing: An Exercise for Colombian Banks," Temas de Estabilidad Financiera 073, Banco de la Republica de Colombia.
    12. Robert Kelly & Eoin Brien & Rebecca Stuart, 2015. "A long-run survival analysis of corporate liquidations in Ireland," Small Business Economics, Springer, vol. 44(3), pages 671-683, March.
    13. Kovacs Ildiko & Karsai Zoltan-Krisztian & Suveg Orsolya & Joita Nicoleta, 2011. "The Relationship Between Macroeconomic Variables And Romanian Corporate Default Rates Between 2002-2008," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 206-213, July.
    14. Bo Jiang & Bruce Philp & Zhongmin Wu, 2018. "Macro stress testing in the banking system of China," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(4), pages 287-298, November.
    15. Roberta Fiori & Claudia Pacella, 2019. "Should the CCYB be enhanced with a sectoral dimension? The case of Italy," Questioni di Economia e Finanza (Occasional Papers) 499, Bank of Italy, Economic Research and International Relations Area.
    16. Lotte Schou-Zibell & Jose Ramon Albert & Lei Lei Song, 2010. "A Macroprudential Framework for Monitoring and Examining Financial Soundness," Working Papers on Regional Economic Integration 43, Asian Development Bank.
    17. Borio, Claudio & Drehmann, Mathias & Tsatsaronis, Kostas, 2014. "Stress-testing macro stress testing: Does it live up to expectations?," Journal of Financial Stability, Elsevier, vol. 12(C), pages 3-15.
    18. Paolo Guarda & Abdelaziz Rouabah & John Theal, 2011. "An MVAR Framework to Capture Extreme Events in Macroprudential Stress Tests," BCL working papers 63, Central Bank of Luxembourg.
    19. Petr Jakubik & Saida Teleu, 2025. "Improving Credit Risk Assessment in Uncertain Times: Insights from IFRS 9," Risks, MDPI, vol. 13(2), pages 1-20, February.
    20. Sun, Tao, 2010. "Identifying Vulnerabilities in Systemically Important Financial Institutions in a Macro-Financial Linkages Framework," The Journal of Economic Asymmetries, Elsevier, vol. 7(2), pages 77-103.
    21. Bruneau, C. & de Bandt, O. & El Amri, W., 2012. "Macroeconomic fluctuations and corporate financial fragility," Journal of Financial Stability, Elsevier, vol. 8(4), pages 219-235.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:ijfirm:v:14:y:2024:i:2:p:103-112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://journalfirm.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.