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DETERMINANTS OF LOAN AND BAD LOAN DYNAMICS: EVIDENCE FROM ITALY

Marco Causi and Andrea Baldini ()

No o232, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: In this paper we describe the dynamics of Loans and Bad Loans in the Italian Non-Financial Sector during the period 1998:4 to 2014:4. We use a Factor Model approach to take into account all of the macroeconomic fac- tors that could a ect the cyclical dynamics of the credit market, and we try to capture the causal e ect of di erent variables at quarterly frequency, tak- ing into account the structural break of the Great Recession. We reach two main conclusions: rst, our evidence con rms the well-known negative rela- tion between GDP variation and Bad Loan ows, and moreover shows a strong infra-annual Bad Loan reaction triggered by a GDP shock within a period of six months. Second, if we correctly remove structural economic factors we nd that New Bad Loan Entry rate cause Loan variations. These facts are useful in formulating some policy conclusions.

Keywords: empirical nance; non-performing loans; credit; factor models; favar. (search for similar items in EconPapers)
JEL-codes: C22 C58 E51 G00 H81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2018-01
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