The Impact of Macroeconomic Indicators on the Nonperforming Loans (Case of Iran)

Mohammad Valipour Pasha () and Hossein Bastanzad ()
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Mohammad Valipour Pasha : Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI)
Hossein Bastanzad : Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI)

Journal of Money and Economy, 2015, vol. 10, issue 1, 63-84

Abstract: Financial statements of nineteen mature banks have been patronized to examine the impact of macroeconomic indicators and bank-specific determinants on the NPLs ratio through Quantile and Panel Data regression approaches. The impact of macroeconomic indicators on credit risk is statistically estimated for banking network via two directions. First, different quantiles are econometrically calculated, assessed and compared during 2007-12. Second, the Panel Data estimation is utilized in the same way to verify the outcomes of quantile regression and to check the robustness. Results indicate that the impact of real money supply on the banks' NPLs in 25%, 50%, and 75% of data is positive and significant in line with empirical evidence. The coefficients of the other variables (including the ratio of individual banks' performing loans to total deposits, individual banks' performing loans to total loans ratio, as well as GDP would be positively significant as well. The real interest rate has negatively-significantly driven NPLs. The banks' NPLs are generally exacerbated by the impact of higher real money supply over the long run, real interest rate in the money market and upper return in the assets market mainly because of the negative-inflationary transmission effect.

Keywords: Nonperforming loans; Macroeconomic indicators; Quantile regression; Panel data (search for similar items in EconPapers)
JEL-codes: C16 C23 E51 G21 (search for similar items in EconPapers)
Date: 2015
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