Nonperforming Loans in Asia: Determinants and Macrofinancial Linkages
Peter Rosenkranz () and
Junkyu Lee ()
Additional contact information
Junkyu Lee: Asian Development Bank
No 574, ADB Economics Working Paper Series from Asian Development Bank
The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the implications for financial stability in the region. Using a dynamic panel model, we assess the determinants of the evolution of bankspecific NPLs in Asia and find that macroeconomic conditions and bank-specific factors—such as rapid credit growth and excessive bank lending—contribute to the buildup of NPLs. Further, a panel vector autoregression analysis of macrofinancial implications of NPLs in emerging Asia offers significant evidence for the feedback effects of NPLs on the real economy and financial variables. Impulse response functions demonstrate that a rising NPL ratio decreases gross domestic product growth and credit supply and increases unemployment rate. Our findings underline the importance of considering policy options to swiftly and effectively manage and respond to a buildup of NPLs. The national and regional mechanisms underlying NPL resolution are important for safeguarding financial stability in an increasingly interconnected global financial system.
Keywords: dynamic panel model; emerging Asia; financial stability; macrofinancial feedback effects; nonperforming loans; panel vector autoregression model (search for similar items in EconPapers)
JEL-codes: C32 C33 E44 G21 O16 (search for similar items in EconPapers)
Pages: 38 pages
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
https://www.adb.org/sites/default/files/publicatio ... sia-determinants.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0574
Access Statistics for this paper
More papers in ADB Economics Working Paper Series from Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines. Contact information at EDIRC.
Bibliographic data for series maintained by Orlee Velarde ().