Macroeconomic Determinants of the Credit Risk in the Banking System: The Case of the GIPSI

Vitor Castro

No 2013-12, GEMF Working Papers from GEMF, Faculty of Economics, University of Coimbra

Abstract: In this paper, we analyse the link between the macroeconomic developments and the banking credit risk in a particular group of countries – Greece, Ireland, Portugal, Spain and Italy (GIPSI) – recently affected by unfavourable economic and financial conditions. Employing dynamic panel data approaches to these five countries over the period 1997q1-2011q3, we conclude that the banking credit risk is significantly affected by the macroeconomic environment: the credit risk increases when GDP growth and the share and housing price indices decrease and rises when the unemployment rate, interest rate, and credit growth increase; it is also positively affected by an appreciation of the real exchange rate; moreover, we observe a substantial increase in the credit risk during the recent financial crisis period. Several robustness tests with different estimators have also confirmed these results. The findings of this paper indicate that all policy measures that can be implemented to promote growth, employment, productivity and competitiveness and to reduce external and public debt in these countries are fundamental to stabilize their economies.

Keywords: Credit risk; Macroeconomic factors; Banking system; GIPSI; Panel data. (search for similar items in EconPapers)
JEL-codes: C23 F41 G21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2013-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (123)

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Related works:
Journal Article: Macroeconomic determinants of the credit risk in the banking system: The case of the GIPSI (2013)
Working Paper: Macroeconomic determinants of the credit risk in the banking system: The case of the GIPSI (2012)
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