Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality

Inessa Love and Rima Turk Ariss

No 201310, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: This paper investigates macro-financial linkages in Egypt using two complementary methods, assessing the interaction between different macroeconomic aggregates and loan portfolio quality in a multivariate framework as well as through a panel vector autoregressive method that controls for bank-level characteristics. Using a panel of banks over 1993-2010, the authors find that a positive shock to capital inflows and growth in gross domestic product improves banks’ loan portfolio quality, and that the effect is fairly similar in magnitude using the multivariate and panel vector autoregressive frameworks. In contrast, higher lending rates may lead to adverse selection problems and hence to a drop in portfolio quality. The paper also reports that a larger market share of foreign banks in the industry improves loan quality.

Keywords: Macroeconomic Shocks; Banks; Loan Quality; Panel Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C63 E44 G21 G28 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2013-06
New Economics Papers: this item is included in nep-ara, nep-ban, nep-cba, nep-fdg and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.economics.hawaii.edu/research/workingpapers/WP_13-10.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Macro-financial linkages in Egypt: A panel analysis of economic shocks and loan portfolio quality (2014)
Working Paper: Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality (2013)
Working Paper: Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality (2013)
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