Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies

Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies
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Volume/Issue:
2011/161
Series:
IMF Working Papers
Author(s):
Mwanza Nkusu
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
July 2011
DOI:
http://dx.doi.org/10.5089/9781455297740.001
ISBN:
9781455297740
ISSN:
1018-5941
Page:
27
We analyze the link between nonperforming loans (NPL) and macroeconomic performance using two complementary approaches. First, we investigate the macroeconomic determinants of NPL in panel regressions and confirm that adverse macroeconomic developments are associated with rising NPL. Second, we investigate the feedback between NPL and its macroeconomic determinants in a panel vector autoregressive (PVAR) model. The impulse response functions (IRFs) attribute to NPL a central role in the linkages between credit market frictions and macrofinancial vulnerability. They suggest that a sharp increase in NPL triggers long-lived tailwinds that cripple macroeconomic performance from several fronts.
Article

Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies

Author(s):
Mwanza Nkusu
Published Date:
July 2011
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