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Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance

28 Pages Posted: 9 Apr 2013  

Nir Klein

International Monetary Fund (IMF)

Date Written: March 2013

Abstract

The paper investigates the non-performing loans (NPLs) in Central, Eastern and South-Eastern Europe (CESEE) in the period of 1998–2011. The paper finds that the level of NPLs can be attributed to both macroeconomic conditions and banks’ specific factors, though the latter set of factors was found to have a relatively low explanatory power. The examination of the feedback effects broadly confirms the strong macro-financial linkages in the region. While NPLs were found to respond to macroeconomic conditions, such as GDP growth, unemployment, and inflation, the analysis also indicates that there are strong feedback effects from the banking system to the real economy, thus suggesting that the high NPLs that many CESEE countries currently face adversely affect the pace economic recovery.

JEL Classification: E32, E44, E51, G21

Suggested Citation

Klein, Nir, Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance (March 2013). IMF Working Paper No. 13/72. Available at SSRN: https://ssrn.com/abstract=2247224

Nir Klein (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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