Aug 2026· EPRA International Journal of Economic Growth and Environmental Issues· 0 citations
Abstract
This study develops a dynamic panel econometric framework to quantify the structural impact of macroeconomic conditions on the non-performing loan (NPL) ratios of commercial banks across a panel of twenty-eight emerging market economies observed between 2010 and 2024. Addressing dynamic persistence and the endogeneity inherent in the joint determination of credit quality and macro-financial conditions, the empirical strategy combines a two-step System Generalized Method of Moments (System GMM) estimator with a Panel Autoregressive Distributed Lag (P-ARDL) error-correction specification estimated via Pooled Mean Group (PMG). The results confirm strong dynamic persistence in NPL ratios and show that real GDP growth, the unemployment rate, consumer price inflation, and the real lending rate are statistically significant macroeconomic drivers of asset-quality deterioration. Critically, the interaction between currency depreciation and the share of unhedged foreign-currency lending is found to amplify the NPL response to exchange-rate shocks, a channel of particular relevance to partially dollarized banking systems in transition economies such as Uzbekistan, where reported and risk-based measures of asset quality have been shown to diverge materially. The error-correction estimates indicate that approximately one-third of any disequilibrium between actual and long-run equilibrium NPL levels is corrected within a single year. These findings offer a structural basis for calibrating countercyclical provisioning and macroprudential buffers in emerging banking systems exposed to currency and business-cycle volatility.
The present paper aims to investigate the relationship between non-performing assets (NPAs) and profitability in Indian commercial banks. Focusing on the major economic disruptions, namely, the global financial crisis, demonetization and the COVID-19 pandemic, it examines their role in structurally reshaping the NPA-profitability nexus.
Our dataset comprised a balanced panel of 30 public and private sector commercial banks in India covering the period from 2004 to 2024. We applied Bai–Perron multiple breakpoint tests and Chow tests to identify regime shifts. Static panel regressions with Heteroskedasticity and Autocorrelation Consistent-corrected ordinary least squares and dynamic system generalized method of moments (GMM) estimations are employed to address heteroskedasticity, autocorrelation and endogeneity. The model incorporates bank-specific factors, market concentration indicators, macroeconomic variables and an interaction term between inflation and broad money (BM).
The findings reveal multiple statistically significant structural breaks corresponding to major economic shocks. NPAs consistently exert a significant negative impact on profitability across all regimes, while bank size positively influences return on assets, particularly during crisis periods. Market concentration yields mixed and regime-dependent effects. The interaction between inflation and BM significantly moderates profitability during transitional phases, highlighting the role of inflation-adjusted liquidity conditions in shaping bank performance.
The findings suggest that bank managers should strengthen credit risk monitoring and adopt proactive asset quality management, especially during periods of inflationary liquidity expansion. The policymakers and regulators can benefit from implementing countercyclical capital buffers and dynamic stress-testing frameworks tailored to structural shocks. However, our results should be interpreted with caution as we excluded foreign banks from our dataset and focused solely on Indian commercial banks, which may limit cross-country generalizability. Future research could extend the framework to comparative emerging-market settings.
To the best of our knowledge, this study is the first attempt to integrate structural break analysis with dynamic GMM estimation and to introduce inflation-adjusted liquidity as a moderating mechanism in the NPA-profitability relationship in an emerging economy context.
Faiza Rehman, Mohammad Ammar Ahsan, S. Akhtar et al.· Journal of Financial Regulat...· 0 citations
Investment credit plays an important role in financing productive activities and sustaining Indonesia's economic development. Nevertheless, limited empirical evidence is available regarding how fluctuations in gold prices together with other macroeconomic indicators influence investment credit during the post-pandemic period. This study investigates the effects of gold prices, the USD/IDR exchange rate, the Industrial Production Index (IPI), the BI 7-Day Reverse Repo Rate, and inflation on investment credit using monthly observations from June 2016 to December 2024. An Autoregressive Distributed Lag (ARDL) model combined with an Error Correction Model (ECM) is employed to evaluate both long-run associations and short-run adjustments. The empirical findings reveal that the variables are cointegrated, implying the existence of a stable long-term equilibrium. However, none of the estimated long-run coefficients is statistically distinguishable from zero at conventional significance levels. In the short run, exchange rate movements generate the largest response in investment credit, whereas industrial production and the policy interest rate produce relatively modest effects. The error-correction coefficient is negative and statistically significant, indicating that temporary departures from equilibrium are gradually eliminated over time. These findings suggest that investment credit in Indonesia is driven primarily by short-term macroeconomic adjustments rather than persistent long-run effects of individual macroeconomic variables.
N. Atikah, Nadia Kholifia, Lucky Tri Oktoviana et al.· CAUCHY· 0 citations
Abstract Banks play a vital role in a country’s financial system through their intermediation activities, which support economic development. However, the rise in non-performing loans (NPLs) has jeopardized the performance of banks in Sub-Saharan Africa (SSA). Moreover, the behavior of key macroeconomic factors and shocks to monetary policy are closely linked to this issue. This study examines the impact of monetary policy on NPLs in SSA using a panel vector autoregressive model, based on quarterly data from 23 countries spanning 2008Q1 to 2023Q4. The findings reveal that monetary policy shocks significantly affect NPL levels in SSA. Additionally, excessive domestic and external borrowing, inflationary pressures, and exchange rate volatility have substantial consequences for NPL accumulation. This study offers valuable insights into how macroeconomic factors interact to create banking stress and fragility, ultimately undermining financial stability in the region. It recommends that monetary authorities and governments implement credible monetary policies and maintain a stable macroeconomic environment to safeguard the financial sector.
Michael Asiamah, Gábor Dávid Kiss· Journal of Central Banking T...· 0 citations
This study investigates the determinants of credit growth in Western Balkan countries over the period 2011–2023, assessing whether lending dynamics are driven by macroeconomic fundamentals or financial sector conditions. The analysis focuses on key variables, including GDP growth, foreign direct investment (FDI), inflation, and lending interest rates. Using a balanced panel dataset, the study employs pooled Ordinary Least Squares (OLS), fixed and random effects models, and a two-way fixed effects specification with Driscoll–Kraay standard errors to address cross-sectional dependence and unobserved heterogeneity. The empirical results show that lending interest rates exert a statistically significant negative effect on credit growth, indicating that financial conditions play a central role in constraining lending activity. In contrast, GDP growth and inflation are not found to be significant determinants, challenging conventional macro-financial expectations. FDI becomes significant only when introduced in a lagged specification, suggesting a delayed transmission mechanism through which external capital inflows influence credit expansion. The study contributes to the literature by providing comparative multi-country evidence from structurally constrained and bank-dominated financial systems. The findings suggest that credit growth is driven less by traditional macroeconomic factors and more by financial sector conditions and institutional characteristics. These results have important policy implications, highlighting the need to strengthen financial intermediation efficiency and credit transmission mechanisms rather than relying solely on macroeconomic expansion to stimulate lending.
Erleta Halimi, Katalin Czakó, Arben Sahiti et al.· Emerging Science Journal· 0 citations
This study examines the impact of macroeconomic determinants on household non-performing loans (NPLs) in Morocco over the period 2005–2024. Its primary objective is to identify the macroeconomic factors influencing the evolution of household credit risk by employing the Autoregressive Distributed Lag (ARDL) modeling approach. The explanatory variables include economic growth, unemployment rate, lending interest rate, inflation rate, and household debt ratio, while the household non-performing loan ratio serves as the dependent variable. Following the assessment of the stationarity properties of the variables using the Augmented Dickey–Fuller (ADF) unit root test, the ARDL model is estimated. Subsequently, the Pesaran, Shin, and Smith (2001) Bounds Test confirms the existence of a long-run relationship among the variables.
The empirical findings reveal that economic growth significantly reduces household non-performing loans, whereas the lending interest rate exerts a positive effect on household credit default risk. The unemployment rate exhibits a lagged effect, while inflation is found to have a negative impact, contrary to theoretical expectations. Conversely, the household debt ratio does not appear to have a statistically significant effect.
Overall, these findings highlight the crucial role of macroeconomic conditions in shaping household credit risk and provide valuable insights for monetary authorities, financial regulators, and banking institutions in designing effective strategies to mitigate the accumulation of household non-performing loans and preserve financial stability.
Khribech Salim, Benomar Ikram· International journal of res...· 0 citations
This paper examines how economic downturns and currency movements affect the quality of bank loans in Central, Eastern, and Southeastern Europe, using annual data for 14 national banking systems over 2008–2023. We estimate a bias-corrected dynamic fixed-effects model, verify inference with Driscoll–Kraay, cluster-robust, and wild cluster bootstrap procedures, run formal threshold tests, and conduct scenario simulations. Credit risk is highly persistent. The bias-corrected autoregressive coefficient of 0.944 implies a half-life of 12.0 years, although the bootstrap confidence interval of 0.601 to 1.048 does not rule out near-unit-root behavior. Exchange-rate depreciation predicts higher non-performing loan (NPL) ratios and survives both the strictest few-cluster test (p = 0.028) and a correction for euro-adoption breaks, while lower real GDP per capita growth is marginal under the same test (p = 0.060). Threshold tests that re-estimate the threshold in every bootstrap replication do not reject linearity in any of 14 configurations (minimum p-value of 0.071). Institutional quality does not measurably moderate the exchange-rate channel. A severe combined adverse scenario raises the projected NPL ratio from 6.54 to 12.32 percent over five years (90 percent interval: 8.2 to 24.6 percent). Together, the surviving channels and the disciplined null results delimit nonlinear transmission in emerging Europe.
Ivana Miklošević, Andreja Todorović, Andrija Popović· Journal of Risk and Financia...· 0 citations
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