Macroeconomic Determinants of the Non-performing Placements and Off-balance Sheet Liabilities of Croatian Banks

Benazić Manuel () and Radin Dajana ()
Additional contact information
Benazić Manuel: Juraj Dobrila University of Pula, Faculty of Economics and Tourism “Dr. Mijo Mirković”, Preradovića 1/1, 52 100 Pula, Croatia
Radin Dajana: Juraj Dobrila University of Pula, Faculty of Economics and Tourism “Dr. Mijo Mirković”, Preradovića 1/1, 52 100 Pula, Croatia

Organizacija, 2015, vol. 48, issue 2, 75-87

Abstract: Background and Purpose: The non-performing placements and off-balance sheet liabilities are often considered key factors that lead to banking crises. Economic and financial crises increase the level of the non-performing placements and off-balance sheet liabilities which can cause significant losses for banks. Effective management and regulatory/ supervisory institutions such central banks should be able to recognize and quantify these effects. Therefore, the purpose of this study is to empirically determine the existence and the quantitative impact of main Croatian macroeconomic variables on the non-performing placements and off-balance sheet liabilities of Croatian banks in the long and short-run. Methodology: For this purpose the bounds testing (ARDL) approach for cointegration is applied. The ARDL model is performed in two steps. The first step starts with conducting the bounds test for cointegration. In the second step, when cointegration is found, the long-run relationship and the associated error correction model are estimated. Results: The results indicate the existence of stable cointegration relationship between the variables i.e. in the longrun, an increase in real GDP reduces the level of the non-performing placements and off-balance sheet liabilities of Croatian banks wherein an increase in prices, unemployment, interest rate and the depreciation of the Croatian kuna exchange rate increases their level. On the other hand, in the short-run the results are rather mixed. Conclusion: To avoid crises, effective bank management and regulatory/supervisory institutions should be able to recognize and quantify these effects. This is a necessary precondition for implementation of an adequate prudential and monetary policy measures for reducing the level of the non-performing placements and off-balance sheet liabilities.

Keywords: non-performing placements and off-balance sheet liabilities; non-performing loans; economic and financial crises; credit risk; classification of placements and off-balance sheet liabilities (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/orga-2015-0009 (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:vrs:organi:v:48:y:2015:i:2:p:75-87:n:4

DOI: 10.1515/orga-2015-0009

Access Statistics for this article

Organizacija is currently edited by Jože Zupančič

More articles in Organizacija from Sciendo
Bibliographic data for series maintained by Peter Golla ().