The Macroeconomic Drivers of Non-Performing Loans (NPL): Evidence from Selected Countries with Heterogeneous Panel Analysis

MANAS Journal of Social Studies 2021 Volume: 10 No: 2

14 Pages Posted: 28 Apr 2021

Date Written: April 19, 2021

Abstract

NPL could be treated as a critical issue in the financial systems of countries of which have bank-based infrastructures since NPL restrict the credit providing capacity of banks. Hence, necessary financing sources for economic growth and development could not be provided. In this context, the study aims to research the macroeconomic drivers of NPL in selected 23 countries. 4 independent drivers and yearly data between 2006 and 2018 are analyzed by using heterogeneous panel analysis. The empirical findings reveal that (i) credits, gross domestic products (GDP), and savings have statistically significant negative effect whereas foreign exchange rates (FER) have a statistically insignificant positive effect on NPL for the overall panel; (ii) 1% increase in credits reduces NPL by approximately 2%; (iii); FER have statistically significant effects in some countries at the country base; (iv) negative coefficients for credits, savings, and GDP are consistent in both overall panel and country base.

Keywords: Non-Performing Loans; NPL; Drivers of NPL; Heterogeneous Panel

Suggested Citation

Kartal, Mustafa Tevfik and Ayhan, Fatih, The Macroeconomic Drivers of Non-Performing Loans (NPL): Evidence from Selected Countries with Heterogeneous Panel Analysis (April 19, 2021). MANAS Journal of Social Studies 2021 Volume: 10 No: 2, Available at SSRN: https://ssrn.com/abstract=3829558

Mustafa Tevfik Kartal (Contact Author)

Borsa Istanbul ( email )

Reşitpaşa Mah. Borsa İstanbul Cad. No: 4
Borsa İstanbul Cad. No: 4
Istanbul, 34467
Turkey

Fatih Ayhan

affiliation not provided to SSRN

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