The Wavelet Analysis: The Case of Non-Performing Loans in China

Elisa Di Febo and Eliana Angelini
Additional contact information
Elisa Di Febo: Department of Economic Studies, “G. d’Annunzio” University of Chieti—Pescara, Viale Pindaro 42, 65127 Pescara, Italy
Eliana Angelini: Department of Economic Studies, “G. d’Annunzio” University of Chieti—Pescara, Viale Pindaro 42, 65127 Pescara, Italy

Risks, 2022, vol. 10, issue 2, 1-16

Abstract: China has accelerated its banking sector reform in recent years, paying particular attention to non-performing loans (NPLs). The paper’s scope is to analyse the relationship between NPLs and macroeconomic variables in China using quarterly data from 2008/Q1 to 2021/Q1 applying wavelet analysis, which allows the study to scan both short- and long-term causal relationships and connections. The analysis produces interesting results. The GDP does not appear to be as important and as much of a driving force in the dynamics of NPLs as in other emerging countries. On the other hand, inflation shows a highly dynamic dependence on NPLs as it varies over time; however, the most interesting data is the relationship between NPLs and economic policy uncertainty. In the short term, the variables are in phase. In the long term, an increase of EPU has a reduction effect on NPLs, indicating that it affects commercial bank loan sizes by reducing enterprise demand for and bank supply of credit resources.

Keywords: non-performing loans; China; wavelet analysis; GDP; EPU; CPI (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/10/2/32/pdf (application/pdf)
https://www.mdpi.com/2227-9091/10/2/32/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:10:y:2022:i:2:p:32-:d:740765

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().