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Macroeconomic determinants of the credit risk in the banking system: The case of the GIPSI

  • Vítor Castro

    ()

    (Universidade de Coimbra - NIPE)

In this paper, we analyse the link between the macroeconomic developments and the banking credit risk in a particular group of countries – Greece, Ireland, Portugal, Spain and Italy (GIPSI) – recently affected by unfavourable economic and financial conditions and to which, on this matter, the literature has not given a particular attention yet. Employing dynamic panel data approaches to these five countries over the period 1997q1-2011q3, we conclude that the banking credit risk is significantly affected by the macroeconomic environment: the credit risk increases when GDP growth and the share price indices decrease and rises when the unemployment rate, interest rate, and credit growth increase; it is also positively affected by an appreciation of the real exchange rate; moreover, we observe a substantial increase in the credit risk during the recent financial crisis period. Several robustness tests with different estimators have also confirmed these results.

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File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2012/NIPE_WP_11_2012.pdf
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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 11/2012.

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Date of creation: 2012
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Handle: RePEc:nip:nipewp:11/2012
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