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Sector-specific analysis of non-performing loans in the US banking system and their macroeconomic impact

Amit Ghosh

Journal of Economics and Business, 2017, vol. 93, issue C, 29-45

Abstract: Although a growing literature has analyzed the determinants of non-performing loans (henceforth NPLs), very few studies have explored the issue at the disaggregate level. Such an analysis unmasks important differences in the inter-relationships between macroeconomic and balance sheet conditions and different categories of NPLs. The present study examines sector-specific NPLs in the US using data for the 100 largest commercial banks over the period 1992q4-2016q1. While total NPLs remain sensitive to different balance sheet and US macroeconomic conditions, this is most accentuated for real estate loans and its different constituent categories, and commercial & industrial loans. The paper further explores the impact of NPLs on sector-specific product and labor markets. Total NPLs have the most pronounced effect on US housing prices, real GDP growth and housing starts. At the disaggregate level, non-performing construction & land development and C&I loans have the most persistent pernicious impact on corresponding sector-specific employment growth.

Keywords: Non-performing loans; Bank balance sheet; Macrofinancial linkages; Feedback effects; GMM estimations; Panel VAR (search for similar items in EconPapers)
JEL-codes: C33 E44 G21 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.jeconbus.2017.06.002

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