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Macroeconomic determinants of NPLs and strategic default

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  • Giannoulakis, Michail

Abstract

This paper explores the macroeconomic impact of strategic default on non-performing loans (NPLs), addressing a key gap in existing research. Using a novel strategic default proxy developed via principal component analysis (PCA) and a dynamic panel data model, the study reveals a complex temporal relationship. Initially, shocks to strategic defaults lead to a short-term decline in NPL growth, reflecting financial adjustments or delays in recognition, but are followed by a persistent upward trend that significantly weakens loan portfolio quality and financial stability. These findings highlight the need for timely interventions to address misleading short-term stability and mitigate long-term risks. The study also underscores the importance of incorporating behavioural and institutional factors, such as uncertainty and banking leverage, into NPL modelling.

Suggested Citation

  • Giannoulakis, Michail, 2025. "Macroeconomic determinants of NPLs and strategic default," Greenwich Papers in Political Economy 51492, University of Greenwich, Greenwich Political Economy Research Centre.
    • Handle: RePEc:gpe:wpaper:51492
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    File URL: https://gala.gre.ac.uk/id/eprint/51492/7/51492%20GIANNOULAKIS_Macroeconomic_Determinants_Of_NPLs_And_Strategic_Default_%28Working%20Paper%29_2025.pdf
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