The overheating of five EU new member states and cyclicality of systemic risk in the banking sector
Rapid credit growth has been one of the most pervasive developments in recent years in Central and Eastern Europe. We tested for the significance of macroeconomic and banking sector variables that condition non‐performing loan ratios and the hypothesis of procyclicality between economic activity and improving banking‐sector results in the Baltic States, Bulgaria and Romania. The theory of procyclicality between economic activity and the non‐performing loan ratio was proven. The increased economic activity improved the loan portfolio quality of the banking sector, as indicated by a lower NPL ratio. Due to a high share of loans denominated in a foreign currency and the fact of productivity gains in the tradable sector, the appreciation of the real exchange rate contributed to an improvement in loan portfolio quality. The procyclicality of banking sector performance and high economic activities growth could be a signal of an economy overheating and therefore a slowdown in economic activity is likely to accelerate the growth of the non‐performing loan ratio in the Baltic States, Bulgaria and Romania.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2009)
Issue (Month): 3 (May)
|Contact details of provider:|| Web page: http://www.tandfonline.com/TBEM20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/TBEM20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ivan Baboucek & Martin Jancar, 2005. "Effects of Macroeconomic Shocks to the Quality of the Aggregate Loan Portfolio," Working Papers 2005/01, Czech National Bank, Research Department.
- Petr Jakubik & Jaroslav Hermanek, 2007. "Credit Risk and Stress Testing of the Banking Sector of the Czech Republic," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2006, chapter 0, pages 57-68 Czech National Bank, Research Department.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996.
"The twin crises: the causes of banking and balance-of-payments problems,"
International Finance Discussion Papers
544, Board of Governors of the Federal Reserve System (U.S.).
- 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, vol. 89(3), pages 473-500, June.
- Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
- Reinhart, Carmen & Kaminsky, Graciela, 2000.
"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
- Peter Backé & Thomas Reininger & Walko Zoltan, 2006. "Main Features of Recent Banking Sector Developments in Selected Southeastern European Countries," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 11, pages 66-82.
- Gianni De Nicolo & Sami Geadah & Dmitriy Rozhkov, 2003. "Financial Development in the CIS-7 Countries; Bridging the Great Divide," IMF Working Papers 03/205, International Monetary Fund.
- Gergely Kiss & Márton Nagy & Balázs Vonnák, 2006. "Credit Growth in Central and Eastern Europe: Convergence or Boom?," MNB Working Papers 2006/10, Magyar Nemzeti Bank (Central Bank of Hungary).
- Evens SALIES & Peter MOFFATT, 2004.
"A note on the modelling of hyper-inflations,"
- Francesco D'Arack & Sandrine Levasseur, 2007.
"The Determinants of Capital Buffers in CEECs,"
Sciences Po publications
N°2007-28, Sciences Po.
- Martin ÈIHÁK & Jaroslav HEØMÁNEK & Michal HLAVÁÈEK, 2007. "New Approaches to Stress Testing the Czech Banking Sector (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 41-59, March.
- Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
- Nathaniel Beck, Jonathan N. Katz, 2004. "Random Coefficient models for time-series-cross-section data," Working Papers 1205, California Institute of Technology, Division of the Humanities and Social Sciences.
- Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
- Egert, Balázs & Backé, Peter & Zumer, Tina, 2006.
"Credit growth in Central and Eastern Europe: new (over)shooting stars?,"
Working Paper Series
0687, European Central Bank.
- Peter Backé & Balázs Égert, 2006. "Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 112-139.
- Jappelli, Tullio & Pagano, Marco, 1992.
"Saving, Growth and Liquidity Constraints,"
CEPR Discussion Papers
662, C.E.P.R. Discussion Papers.
- Iwaisako, Tokuo, 2004. "Stock Index Autocorrelation and Cross-autocorrelations of Size-sorted Portfolios in the Japanese Market," Discussion Paper Series a448, Institute of Economic Research, Hitotsubashi University.
- Christoph Duenwald & Nikolay Gueorguiev & Andrea Schaechter, 2005. "Too Much of a Good Thing? Credit Booms in Transition Economies; The Cases of Bulgaria, Romania, and Ukraine," IMF Working Papers 05/128, International Monetary Fund.
- Brzoza-Brzezina, Michal, 2005. "Lending booms in the new EU Member States: will euro adoption matter?," Working Paper Series 0543, European Central Bank.
- Esaka, Taro, 2003. "Panel unit root tests of purchasing power parity between Japanese cities, 1960-1998: disaggregated price data," Japan and the World Economy, Elsevier, vol. 15(2), pages 233-244, April.
- Leena Mörttinen & Paolo Poloni & Patrick Sandars & Jukka Vesala, 2005. "Analysing banking sector conditions - how to use macro-prudential indicators," Occasional Paper Series 26, European Central Bank.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
When requesting a correction, please mention this item's handle: RePEc:taf:jbemgt:v:10:y:2009:i:3:p:219-232. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.