Aug 2026· Journal of Central Banking Theory and Practice· Vol 15, pp. 234 - 266· 0 citations· 52 references
Abstract
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.
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.
Djamalov Gofir Oribjanovich· EPRA International Journal o...· 0 citations
This study examines the impact of monetary policy and financial inclusion on economic growth in Nigeria from 2004Q1 to 2024Q4 using quarterly data from the CBN, the World Bank development indicators and the national statistics bureau. The study uses a quantitative ex post facto time series approach, incorporating monetary policy variables; the monetary policy rate (MPR), the money supply (M2) and the exchange rate (EXR) together with financial inclusion indicator, number of commercial bank branches and inflation, while controlling inflation. Unit root tests confirm the mixture of variables I(0) and I(1), which justifies the use of an Autoregressive Distributed Lag (ARDL) model for both short- and long-term dynamics. The results show that, in the short term, exchange rate changes and bank branch expansion have significantly boosted economic growth, while inflation has had a moderate negative impact and traditional monetary policy instruments have had only a negligible impact. Financial inclusion, both through physical and fintech-enabled banking channels, will underpin sustainable growth in the long term, although inflation and exchange rate volatility have a mixed impact. Granger's causality tests reveal no direct causal link between branch expansion and growth, underlining that financial inclusion is not enough in itself without complementary monetary policies, digital financial services, and financial literacy. The study recommends that digital banking be integrated into physical branches, monetary policies designed to promote inclusive access to finance and national financial literacy programmes be implemented to maximize growth.
N. Abdullahi, Hope Elijah Tumba, Hamisu Ali et al.· Nigerian Journal of Sustaina...· 0 citations
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
The connection between macroeconomic policy and stock market dynamics of Iraqi private commercial banks is a gap in the literature which has traditionally neglected banking sectors in rentier economies. The oil-dependent economy in Iraq is a great place to look into how macroeconomic conditions influence financial markets. We take annual data for banks listed on the Iraq Stock Exchange for 2010-2025 and use the stock performance indicators to measure the influence of the macroeconomy as the dependent variable. Macroeconomic policy is modeled as a composite latent variable including M2 (money supply), inflation, and oil prices. The study uses Partial Least Squares Structural Equation Modeling (PLS-SEM) using SmartPLS and SPSS to test direct and indirect relationships. Higher liquidity and oil prices enhance banking stock performance, while inflation weakens these effects. It can be concluded that macroeconomic policy has an impact on stock markets mainly in terms of liquidity and confidence in the market by investors. The authors also highlight that macroeconomic indicators can be used as a tool of information for investors and policymakers in rentier economies.
Qasim Hameed Naser· Journal of Economics Researc...· 0 citations
This study examines the determinants of non-performing financing (NPF) using country-level Islamic banking system aggregates for the six Gulf Cooperation Council (GCC) countries, with particular attention to the role of global economic policy uncertainty and U.S. monetary policy uncertainty. Using a panel dataset covering the period 2014Q4–2024Q3, this study applies fixed-effects estimation and panel quantile regression to capture both average effects and distributional heterogeneity in financing risk. The findings reveal that the determinants of NPF vary significantly across the conditional NPF distribution. Profitability and capital adequacy are positively associated with NPF, whereas GDP is negatively associated with NPF. Liquidity has a negative and statistically significant association mainly in the middle and upper quantiles, indicating a stronger stabilizing role under elevated risk conditions. Global economic policy uncertainty is significant only in the upper quantiles and has a negative coefficient, while U.S. monetary policy uncertainty shows limited statistical relevance. These results indicate that mean-based models may conceal important differences across financing risk regimes. The findings are interpreted as statistical associations rather than causal effects, given the country-level aggregation, limited cross-sectional dimension, and potential measurement and model specification constraints. This study contributes distribution-sensitive evidence on GCC Islamic banking systems and offers cautious implications for risk monitoring, liquidity management, and macroprudential supervision.
L. Elmonshid· Journal of Risk and Financia...· 0 citations
While empirical literature on macroprudential policy exists for both advanced and emerging economies, studies that simultaneously analyze its effects on macroeconomic and financial variables within the Peruvian context are scarce, limiting the availability of evidence for the design of public policies aimed at preserving national financial system stability. This study sought to fill that gap by analyzing the effects of macroprudential policy on the preservation of macroeconomic and financial stability in Peru over the period 2003–2022, using monthly data. The policy tools evaluated are the global capital ratio and the reserve requirement; the stability variables considered include credit, asset prices, capital flows, liquidity, gross domestic product, inflation, and the exchange rate. Following a quantitative approach, a Structural Vector Autoregression econometric model was employed. The results suggest that the global capital ratio reduces credit, while the reserve requirement helps maintain liquidity in the banking system. From a financial stability perspective, these contractionary effects on credit and capital flows are desirable, as they reflect the capacity of these instruments to moderate the accumulation of systemic vulnerabilities. Additionally, favorable effects on asset prices were found, along with more moderate effects on GDP containment, CPI stability, and exchange rate control. Overall, the results indicate that macroprudential policies contribute positively to safeguarding the financial system and maintaining macroeconomic stability in Peru.
