Non-performing loans in Central-East European countries: investigation of macroeconomic, policy, and global risk determinants

Agim Kukeli, Robert C. Forrester, Fitim Deari and John E. Martinez

Global Business and Economics Review, 2023, vol. 29, issue 3, 265-286

Abstract: This study investigates the impact of macroeconomic, policy, and global risk variables on non-performing loans (NPLs) for 18 Central-East European Countries (CEEC) over 26 years (1995-2020). The study uses the method of unbalanced panel data analysis. Results reveal that comprehensive triple-factor analyses explain NPLs variation for the period and countries included in this study. We find that an increase in GDP growth, inflation, and trade decrease NPLs while an increase in credit availability, lending rate, and exchange rate increase NPLs. We find that an increase in Euro-area GDP growth and unemployment rate will increase NPLs. These effects are sensitive to both pre-and post-US Great Recession and for middle-income/high-income countries. The novelty of this study rests on being the first to investigate economy-wide aggregate factors' impact on NPLs. and confirming that there is room for policymakers to mitigate bad loans before and when they become a problem.

Keywords: macroeconomic variables; non-performing loans; NPLs; unbalanced panel data analysis; global risk variables. (search for similar items in EconPapers)
Date: 2023
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