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

Author/Editor:

Inessa Love ; Rima Turk Ariss

Publication Date:

December 30, 2013

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 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.

Series:

Working Paper No. 13/271

Subject:

English

Publication Date:

December 30, 2013

ISBN/ISSN:

9781484338315/1018-5941

Stock No:

WPIEA2013271

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

40

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