The impact of macroeconomic factors on non-performing loans in Romania: a time series analysis

Simona Mașcu and Marușa PESCU (beca)
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Simona Mașcu: Bucharest University of Economic Studies, Romania
Marușa PESCU (beca): “Ovidius” University of Constanta, Romania

Theoretical and Applied Economics, 2016, vol. XXIII, issue Special(I), 231-243

Abstract: This paper aims to empirically evaluate the potential effects of macroeconomic variables and determinants of non-performing bank loans for all commercial banks and savings institutions in Romania for the period 1997-2014, using VAR method. In order to achieve all the research objectives and to establish if they explain the endogenous variable non-performing loans to total gross loans ratio, we used the following explanatory variables: inflation, real interest rate, the annual percentage growth rate of GDP per capita, gross domestic savings, general government final consumption expenditure. In Romania, non-performing loans ratio are determined based on reports from all banks: both those which use the standard approach to assessing credit risk and those applying internal rating models. NPLs represent a major obstacle to the development of banking sector. Therefore, one of the key objectives of the banking sector reforms in Romania has been to reduce the high level of NPLs by transferring to the Bank Assets Recovery Agency of a volume of non-performing loans from the Bancorex and Banca Agricola portfolio (ANEIR-CPCE, 2014) to recover the outstanding and doubtful claims. From the econometric model, we can summarize that the real interest rate of the previous year and two years ago have a positive impact on the NPL ratio in the current year.

Keywords: Non-performing loans; Romanian banking system; Macroeconomic determinants; Time series analysis; VAR. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xxiii:y:2016:i:special(i):p:231-243

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