IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v23y2018i4p376-392.html
   My bibliography  Save this article

Public policy and financial stability: The impact of PCA and TARP on U.S. bank non‐performing loans

Author

Listed:
  • Chunxia Jiang
  • Angelos Kanas
  • Philip Molyneux

Abstract

This study explores the implications of prompt corrective action and the Troubled Asset Relief Program on the behaviour of non‐performing loans (NPLs) and real estate non‐performing loans (RELs) in the United States over 1984–2015 using a Markov switching framework. We find that NPLs and RELs exhibit pronounced episodic behaviour switching between non‐stationary and stationary regimes. Prompt corrective action and the Troubled Asset Relief Program have a significant impact on banking sector stability by influencing the probability of switching from non‐stationary regimes to stationary regimes and by reducing the level of NPLs and RELs. These results are robust to various model specifications and have important implications for bank regulation as well as for the formulation of macro stress testing.

Suggested Citation

  • Chunxia Jiang & Angelos Kanas & Philip Molyneux, 2018. "Public policy and financial stability: The impact of PCA and TARP on U.S. bank non‐performing loans," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 23(4), pages 376-392, October.
    • Handle: RePEc:wly:ijfiec:v:23:y:2018:i:4:p:376-392
    DOI: 10.1002/ijfe.1622
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1622
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1622?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kemal Kozarić & Emina Žunić Dželihodžić, 2020. "Effects of Macroeconomic Environment on Non-Performing Loans and Financial Stability: Case of Bosnia and Herzegovina," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(2), pages 5-17.
    2. Habib Ur Rahman & Adam Arian & John Sands, 2023. "Does Fiscal Consolidation Affect Non-Performing Loans? Global Evidence from Heavily Indebted Countries (HICs)," JRFM, MDPI, vol. 16(9), pages 1-15, September.
    3. Amila Žunić & Kemal Kozarić & Emina Žunić Dželihodžić, 2021. "Non-Performing Loan Determinants and Impact of COVID-19: Case of Bosnia and Herzegovina," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(3), pages 5-22.

    More about this item

    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:wly:ijfiec:v:23:y:2018:i:4:p:376-392. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    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.