Financial intermediation analysis from financial flows

Claudio Oliveira De Moraes, José Americo Pereira Antunes and Adriano Rodrigues

Journal of Economic Studies, 2019, vol. 46, issue 3, 727-747

Abstract: Purpose - The purpose of this paper is to analyze the financial friction effect of non-performing loans (NPLs) on financial intermediation (FI) through empirical evidence from the Brazilian experience. Design/methodology/approach - The authors develop a new variable, financial intermediation flow and a new indicator, FI, both measures of FI. To empirically test FI, the authors use a dynamic panel data framework that draws on 101 banks (December 2000 to December 2015). Findings - An increase in NPL reduces FI. Thus, NPL amplifies financial friction in FI. This result holds in different time frames, such as the pre-crisis period, the crisis period and the post-crisis period. Practical implications - The FI measure developed in this study offers the policymakers a possibility to monitor financial stability. Originality/value - This study adds to this debate by proposing a measure of FI derived from financial flows. This measure allows one to estimate the role of NPL as a financial friction that can pose a threat to financial stability.

Keywords: Credit risk; Financial intermediation; Financial stability; Financial flows; Financial friction; E44; E58; G38 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-10-2017-0302

DOI: 10.1108/JES-10-2017-0302

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