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Cyclicality of the banking sector performance and macro environment in the Czech republic, Slovakia and Slovenia

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  • Mejra Festić
  • Dejan Romih

Abstract

An exposure to macroeconomic risk factors across banks is a source of systemic risk that influences the banking sector performance. In this paper, we present some evidence on macroeconomic variables affecting the non-performing loans (NPL) ratio in the Czech Republic, Slovakia and Slovenia. The GDP growth might have improved borrowers' ability to serve their bank loans in Slovenia, meanwhile the accelerating NPL ratio dynamics has failed to support the hypothesis that the GDP growth fosters an improvement in the NPL ratio in the case of Slovakia. Meanwhile deceleration in the NPL ratio on export impulses has supported a procyclical theory in the Czech Republic, Slovakia and Slovenia. The response of non-performing loans to inflation supports the hypothesis about the lowering inflation that decelerates the NPL ratio. Savings have accelerated the NPL ratio in the case of Slovakia and Slovenia. The banking sector performance is possibly reflecting a favourable assessment of the economic growth and an increasing indebtedness of private sector could become causes of concern if the macroeconomic environment should develop less favourably.

Suggested Citation

  • Mejra Festić & Dejan Romih, 2008. "Cyclicality of the banking sector performance and macro environment in the Czech republic, Slovakia and Slovenia," Prague Economic Papers, University of Economics, Prague, vol. 2008(2), pages 99-117.
  • Handle: RePEc:prg:jnlpep:v:2008:y:2008:i:2:id:323:p:99-117
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, pages 473-500.
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    3. Guillermo A. Calvo & Enrique G. Mendoza, 2000. "Contagion, Globalization, and the Volatility of Capital Flows," NBER Chapters,in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 15-41 National Bureau of Economic Research, Inc.
    4. Sebastian Edwards, 2001. "Exchange Rate Regimes, Capital Flows and Crisis Prevention," NBER Working Papers 8529, National Bureau of Economic Research, Inc.
    5. Breuss, Fritz & Fink, Gerhard & Haiss, Peter, 2004. "How well prepared are the New Member States for the European Monetary Union?," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 769-791, October.
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    Citations

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    Cited by:

    1. Tomáš Tichý, 2010. "Posouzení odhadu měnového rizika portfolia pomocí Lévyho modelů
      [Examination of Portfolio Currency Risk Estimation by Means of Lévy Models]
      ," Politická ekonomie, University of Economics, Prague, vol. 2010(4), pages 504-521.
    2. Vasiliki Makri, 2016. "Towards an Investigation of Credit Risk Determinants in Eurozone Countries," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 15(1), pages 27-57, March.
    3. Josheski Dushko & Eftimoski Dimitar, 2016. "Application of Is-Mp-Ia Model and Taylor Rule to Cesee Economies," Economics and Culture, De Gruyter Open, vol. 13(1), pages 5-13, June.
    4. Aleš Melecký & Martin Melecký & Monika Šulganová, 2015. "Úvěry v selhání a makroekonomika: modelování systémového kreditního rizika v České republice
      [Non-Performing Loans and The Macroeconomy: Modeling the Systemic Credit Risk in the Czech Republic]
      ," Politická ekonomie, University of Economics, Prague, vol. 2015(8), pages 921-947.
    5. Vasiliki Makri, 2015. "What Triggers Loan Losses? An Empirical Investigation of Greek Financial Sector," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 119-143, july-Dece.

    More about this item

    Keywords

    economic growth; non-performing loans; macro impulses; cyclicality;

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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