Non-Performing Loans in the ECCU : Determinants and Macroeconomic Impact

Author/Editor:

Kimberly Beaton ; Alla Myrvoda ; Shernnel Thompson

Publication Date:

November 17, 2016

Electronic Access:

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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 assesses the determinants of NPLs in the Eastern Caribbean Currency Union (ECCU) and whether a deterioration in asset quality may result in negative feedback effects from the banking system to economic activity. The results suggest that the deterioration in asset quality can be attributed to both macroeconomic and bank-specific factors. Banks with stronger profitability and lower exposure to the construction sector and household loans tend to have lower NPLs. Further, some evidence indicates that foreign owned banks systematically have lower NPLs than domestic banks, pointing to the presence of important differences across bank practices with an impact on asset quality. Finally, the results emphasize the strength of macrofinancial feedback loops in the ECCU.

Series:

Working Paper No. 16/229

Subject:

English

Publication Date:

November 17, 2016

ISBN/ISSN:

9781475555714/1018-5941

Stock No:

WPIEA2016229

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

33

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