Non performing loans (NPLs) in a crisis economy: Long-run equilibrium analysis with a real time VEC model for Greece (2001–2015)

Konstantinos Konstantakis, Panayotis Michaelides and Angelos Vouldis

Physica A: Statistical Mechanics and its Applications, 2016, vol. 451, issue C, 149-161

Abstract: As a result of domestic and international factors, the Greek economy faced a severe crisis which is directly comparable only to the Great Recession. In this context, a prominent victim of this situation was the country’s banking system. This paper attempts to shed light on the determining factors of non-performing loans in the Greek banking sector. The analysis presents empirical evidence from the Greek economy, using aggregate data on a quarterly basis, in the time period 2001–2015, fully capturing the recent recession. In this work, we use a relevant econometric framework based on a real time Vector Autoregressive (VAR)—Vector Error Correction (VEC) model, which captures the dynamic interdependencies among the variables used. Consistent with international evidence, the empirical findings show that both macroeconomic and financial factors have a significant impact on non-performing loans in the country. Meanwhile, the deteriorating credit quality feeds back into the economy leading to a self-reinforcing negative loop.

Keywords: VAR/VEC; NPLs; Greece; Crisis; Macro-economy; Banking sector (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Non-Performing Loans (ΝPLs) in a Crisis Economy: Long-Run Equilibrium Analysis with a Real-Time VEC Model for Greece (2001-2015) (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:451:y:2016:i:c:p:149-161

DOI: 10.1016/j.physa.2015.12.163

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