Financial Stability and Innovation: The Role of Non-Performing Loans

Massimo Arnone, Alberto Costantiello (), Angelo Leogrande, Syed Kafait Hussain Naqvi and Cosimo Magazzino ()
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Massimo Arnone: Department of Economics and Business, University of Catania, 95124 Catania, Italy
Syed Kafait Hussain Naqvi: School of Economics, International Islamic University Islamabad, Islamabad 44000, Pakistan

FinTech, 2024, vol. 3, issue 4, 1-41

Abstract: This study analyses the relationship between non-performing loans (NPLs) and innovation systems at a global level. The data were obtained from the World Bank and the Global Innovation Index over the period 2013–2022 for 149 countries. The k-means algorithm was used to verify the presence of clusters in the data. Since k-means is an unsupervised machine-learning algorithm, we compared the Silhouette coefficient with the Elbow method to find an optimization. The results show that the optimal number of clusters is three, as suggested using the Elbow Method. Furthermore, a panel data analysis was conducted. Results show that the level of NPLs is positively associated with cultural and creative services exports as a percentage of total trade and innovation input sub-index and negatively associated with the Hirsch Index, ICT services exports as a percentage of total trade, ICT services imports as a percentage of total trade, and information and communication technologies.

Keywords: non-performing loans; banking stability; innovation; k-means; panel data (search for similar items in EconPapers)
JEL-codes: C6 F3 G O3 (search for similar items in EconPapers)
Date: 2024
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