Non-Performing Loans (ΝPLs) in a Crisis Economy: Long-Run Equilibrium Analysis with a Real-Time VEC Model for Greece (2001-2015)

Konstantinos Konstantakis, Panayotis Michaelides and Angelos Vouldis

MPRA Paper from University Library of Munich, Germany

Abstract: Αs a result of domestic and international factors, the Greek economy faced a severe crisis which is directly comparable only to the Great Recession. In this context, a prominent victim of this situation was the country‟s banking system. This paper attempts to shed light on the determining factors of non-performing loans in the Greek banking sector. The analysis presents empirical evidence from the Greek economy, using aggregate data on a quarterly basis, in the time period 2001-2015, fully capturing the recent recession. In this work, we use a relevant econometric framework based on a real time Vector Autoregressive (VAR) - Vector Error Correction (VEC) model, which captures the dynamic interdependencies among the variables used. Consistent with international evidence, the empirical findings show that both macroeconomic and financial factors have a significant impact on non-performing loans in the country. Meanwhile, the deteriorating credit quality feeds back into the economy leading to a self-reinforcing negative loop.

Keywords: VAR; VEC; NPLs; Greece; Crisis; Macro-economy; Banking sector (search for similar items in EconPapers)
JEL-codes: C3 C32 G2 G21 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published in Physica A: Statistical Mechanics and its Applications 451.C(2016): pp. 149-161

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Related works:
Journal Article: Non performing loans (NPLs) in a crisis economy: Long-run equilibrium analysis with a real time VEC model for Greece (2001–2015) (2016)
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