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Macro-Financial Covariates of Non-Performing Loans (NPLs) in Pakistani Commercial Banks: A Reexamination Using GMM Estimator


  • Bilal Mehmood

    (Department of Economics, GC University, Lahore, Pakistan)

  • Haider Mahmood
  • Raisa Shabbir Ahmed

    (COMSATS Institute of Information Technology, Lahore, Pakistan)


Non-performing loans has been a limiting factor in smooth growth of commercial banking. To augment the literature in this dimension, this paper subjects the findings of Mehmood et al. (2013) to rigorous statistical treatment and reexamines the relationship found therein. It empirically tests the macro-financial determinants that cause non-performing loans to change. A panel of 13 commercial banks for period of 2003-2012 is subjected to empirical analysis. A more efficient estimator Generalized Method of Moments (GMM) is used to cope with potential endogeneity issues in model that has not been addressed in Mehmood et al. (2013). Macro-Financial determinants non-performing loans are found to be crucial. Policy implications include the policy steps to complement the sound financial system with a healthy macroeconomic environment to reduce non-performing loans in commercial banks in Pakistan.

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  • Bilal Mehmood & Haider Mahmood & Raisa Shabbir Ahmed, 2014. "Macro-Financial Covariates of Non-Performing Loans (NPLs) in Pakistani Commercial Banks: A Reexamination Using GMM Estimator," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(11), pages 443-448, November.
  • Handle: RePEc:ijr:journl:v:2:y:2014:i:11:p:443-448

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    References listed on IDEAS

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    Cited by:

    1. Mahmood, Haider & Chaudhary, A. R., 2013. "Impact of FDI on Income Inequality in Pakistan," MPRA Paper 109460, University Library of Munich, Germany.
    2. Al-Qahtani, Maleeha Mohammed Zaaf & Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Abdalla, Manal Abdalla Zahed & Mawad, Ghada Shihata Ebrahim & Alkhatib, Maha Ahmed Hussein, 2020. "Exploring the Level of Managerial, Political, Academic, Economic and Social Women Empowerment in Saudi Arabia," MPRA Paper 109447, University Library of Munich, Germany.
    3. Mahmood, Haider, 2018. "An Investigation of Macroeconomic Determinants of FDI Inflows in Bangladesh," MPRA Paper 109448, University Library of Munich, Germany.
    4. Alkhateeb, Tarek Tawfik Yousef & Alkahtani, Nasser Saad & Mahmood, Haider, 2017. "Assessing the Role of Foreign Labour on Saudi Labour Unemployment in Saudi Arabia," MPRA Paper 109449, University Library of Munich, Germany.

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    More about this item


    Non Performing Loans; Economic Growth; Endogeneity; GMM;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages


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