Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality

December 30, 2013

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Format: Chicago

Inessa Love, and Rima A Turk. Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality, (USA: International Monetary Fund, 2013) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates macro-financial linkages in Egypt using two complementary methods, assessing the interaction between different macroeconomic aggregates and loan portfolio quality in a multivariate framework as well as through a panel vector autoregressive method that controls for bank-level characteristics. Using a panel of banks over 1993-2010, the authors find that a positive shock to capital inflows and growth in gross domestic product improves banks’ loan portfolio quality, and that the effect is fairly similar in magnitude using the multivariate and panel vector autoregressive frameworks. In contrast, higher lending rates may lead to adverse selection problems and hence to a drop in portfolio quality. The paper also reports that a larger market share of foreign banks in the industry improves loan quality.

Subject: Balance of payments, Banking, Capital account, Commercial banks, Financial institutions, Foreign banks, Loans, Macroeconomic risks, Public financial management (PFM)

Keywords: Bank activity, Bank privatization, Bank risk-taking, Banks, Capital account, Commercial banks, Foreign banks, Growth response, Loan growth, Loan quality, Loan reserve, Loans, Macroeconomic risks, Macroeconomic Shocks, Market share, Panel Vector Autoregression, Portfolio composition, Portfolio manipulation, Portfolio quality, PVAR framework bank-level indicators, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/271
Stock No:

WPIEA2013271
ISBN:

9781484338315
ISSN:

1018-5941

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