EconPapers    
Economics at your fingertips  
 

Determinants of Non-Performing Loans in Greece: the intricate role of fiscal expansion

Maria Karadima and Helen Louri

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: Following the financial and debt crises in the euro area and the delays in formulating a cohesive policy response, Greek banks faced serious problems with the increase in non-performing loans (NPLs) being the most threatening. In this study, we attempt to empirically investigate the determinants of NPLs in the Greek banking sector, using quarterly aggregate data for the period 2003Q1-2020Q2 and the autoregressive distributed lag (ARDL) bounds testing approach. We find that NPLs are determined mostly by factors related to macroeconomic conditions in Greece during the period under investigation, rather than by bank-related factors. Of particular interest is the case of government debt, which is found to exert a significant and positive long-term impact on NPLs irrespective of some short-term dynamics that appear to provide a temporary relief. The fiscal balance is also found to exert a negative long-term effect, justifying the quest for surpluses post-crisis. As debt accumulation is a policy followed by most countries in order to stabilize economies hit by the COVID-19 crisis, its long-term effects on the financial system should be taken into account and institutional measures introduced to face the new risk.

Keywords: Greece; Non-performing loans; fiscal expansion; ARDL; Bounds testing (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ban and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published

Downloads: (external link)
https://www.lse.ac.uk/Hellenic-Observatory/Assets/ ... ers/GreeSE-No160.pdf (application/pdf)

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:hel:greese:160

Access Statistics for this paper

More papers in GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE Contact information at EDIRC.
Bibliographic data for series maintained by Vassilis Monastiriotis ().

 
Page updated 2021-10-08
Handle: RePEc:hel:greese:160