Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance

Nir Klein

No 2013/072, IMF Working Papers from International Monetary Fund

Abstract: The paper investigates the non-performing loans (NPLs) in Central, Eastern and South-Eastern Europe (CESEE) in the period of 1998–2011. The paper finds that the level of NPLs can be attributed to both macroeconomic conditions and banks’ specific factors, though the latter set of factors was found to have a relatively low explanatory power. The examination of the feedback effects broadly confirms the strong macro-financial linkages in the region. While NPLs were found to respond to macroeconomic conditions, such as GDP growth, unemployment, and inflation, the analysis also indicates that there are strong feedback effects from the banking system to the real economy, thus suggesting that the high NPLs that many CESEE countries currently face adversely affect the pace economic recovery.

Keywords: WP; bank; return on equity; GDP; Macrofinancial linkages; non-performing loans; credit growth; feedback effects; data quality; NPLS ratio; NPL shock; NPLS problem; GDP growth; NPLS result; Nonperforming loans; Inflation; Loans; Credit; Commercial banks; Global (search for similar items in EconPapers)
Pages: 27
Date: 2013-03-20
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Citations: View citations in EconPapers (212)

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