The Banking Sector and Macroeconomic Performance in Central European Economies

Merja Festiæ () and Jani Bekõ
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Merja Festiæ: Faculty of Economics and Business, University of Maribor, http://www.uni-mb.si
Jani Bekõ: Economic Institute of Ljubljana Law School, Slovenia, http://www.eipf.si

Czech Journal of Economics and Finance (Finance a uver), 2008, vol. 58, issue 03-04, 131-151

Abstract: We present empirical evidence on the macroeconomic variables affecting non-performing loan (NPL) ratios in five central European economies (CEEs). We reach four main conclusions. First, a slowdown in economic activity can be expected to deteriorate the NPL ratios in the CEEs. Second, in four out of the five countries, foreign direct investment growth appears to improve NPL ratios. Third, an increase in real interest rates has a negative impact on the financial position of borrowers and loan portfolio quality in all the five CEEs. Fourth, in a majority of CEEs, increasing credit to the private sector increases the NPL ratio, indicating a need to strengthen the supervision of banks’ lending activities.

Keywords: non-performing loans; systemic risk; macro environment; economic growth (search for similar items in EconPapers)
JEL-codes: C51 F47 G15 G21 P51 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:58:y:2008:i:3-4:p:131-151

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