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Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies
Author:
Ms. Mwanza Nkusu
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Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 161
Language:
English
Publication Date:
01 Jul 2011
DOI:
https://doi.org/10.5089/9781455297740.001
ISBN:
9781455297740
ISSN:
1018-5941
Pages:
27
Keywords:
WP; NPL; price; unemployment; higher-than-expected NPL ratio; Banks; macrofinancial linkages; nonperforming loans; business fluctuations; NPL increase; modeling NPL; NPL measure; NPL dynamics; asset quality; NPL time series; Credit; Loans; Financial statements; Housing prices; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund