The Trade Deficit and Banking Sector Results in Romania and Bulgaria

Alenka Kavkler () and Mejra Festić
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Alenka Kavkler: Faculty of Economics and Business, University of Maribor, Slovenia and EIPF - Economic Institute, Ljubljana, Slovenia
Mejra Festić: Faculty of Economics and Business, University of Maribor, Slovenia and EIPF - Economic Institute, Ljubljana, Slovenia

The AMFITEATRU ECONOMIC journal, 2010, vol. 12, issue 27, 199-213

Abstract: We tested for the significance of macroeconomic variables that condition non-performing loan ratios. Our estimates for Bulgaria and Romania support the hypothesis that the growth of available finance might harm banking performance and deteriorate NPL dynamics, most probably due to the overheating of economies. Since we confirmed that the dynamics of net exports of these economies deteriorated the NPL ratio, the weakening of growth in export-oriented industries could lead to economic contraction with a direct impact on the sustainability of banking-sector results in these countries. Large current account deficits are typical for emerging markets and do not pose a problem as long as they are caused by the importing of capital goods, and, if future export growth is strong enough to reimburse foreign debt. Structural dependence on external financing - which is in part a by-product of the effect of low levels of internal saving - have led to large current account deficits and financial instability.

Keywords: cyclicality; non-performing loans; systemic risk; asset quality; economic growth (search for similar items in EconPapers)
JEL-codes: F47 G15 G21 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:aes:amfeco:v:12:y:2010:i:27:p:199-213

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