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A Dynamic Approach to Analyzing the Effect of the Global Crisis on Non-Performing Loans : Evidence from the Turkish Banking Sector

Author

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  • Vuslat Us

Abstract

This paper analyzes the effect of the global crisis on the determinants of non-performing loans in the Turkish banking sector by using dynamic panel estimation techniques. Empirical findings suggest that non-performing loans present persistence, which is more evident after the crisis, while other regressors have also persistent effects in the post-crisis period. Moreover, non-performing loans are mostly shaped by bank-specific variables before the crisis, whereas, after the crisis, non-performing loans are also driven by macroeconomic and policy-related variables. In particular, the post-crisis significance of GDP, policy rate and sovereign debt shows that robust economic activity, tight monetary policy and strong fiscal balances restrict non-performing loans, thereby enhancing financial stability. On the other hand, the significance of inflation in both sub-periods indicates that commitment to price stability objective is indispensable for limiting non-performing loans and promoting financial stability. In the period ahead, the speed and the direction of normalization in global monetary policies may determine the course of financial conditions, which therefore have implications regarding non-performing loan dynamics and financial stability.

Suggested Citation

  • Vuslat Us, 2016. "A Dynamic Approach to Analyzing the Effect of the Global Crisis on Non-Performing Loans : Evidence from the Turkish Banking Sector," Working Papers 1612, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1612
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2016/16-12
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    Cited by:

    1. Segun Thompson Bolarinwa & Olawale Akinyele & Xuan Vinh Vo, 2021. "Determinants of nonperforming loans after recapitalization in the Nigerian banking industry: Does efficiency matter?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1509-1524, September.
    2. Karadima, Maria & Louri, Helen, 2021. "Determinants of non-performing loans in Greece: the intricate role of fiscal expansion," LSE Research Online Documents on Economics 110741, London School of Economics and Political Science, LSE Library.
    3. Usman Bashir & Shoaib Khan & Abdulhafiz Jones & Muntazir Hussain, 2021. "Do banking system transparency and market structure affect financial stability of Chinese banks?," Economic Change and Restructuring, Springer, vol. 54(1), pages 1-41, February.
    4. Petr Jakubik & Eyup Kadioglu, 2022. "Factors affecting bank loan quality: a panel analysis of emerging markets," International Economics and Economic Policy, Springer, vol. 19(3), pages 437-458, July.
    5. Salvador Climent-Serrano, 2019. "Effects of economic variables on NPLs depending on the economic cycle," Empirical Economics, Springer, vol. 56(1), pages 325-340, January.

    More about this item

    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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