Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies
IMF Working Papers, July 1, 2011
Source details
- Canonical URL
- Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies
Other formats
Bibliographic details
- Authors: Mwanza Nkusu
- Published: July 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455297740.001
Summary
- Title: Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies
- Author: Mwanza Nkusu
- Publication date: July 1, 2011
- Series: Working Paper No. 2011/161
- Pages: 27
- DOI: https://doi.org/10.5089/9781455297740.001
- Core conclusion: A sharp increase in nonperforming loans (NPL) triggers long-lived tailwinds that cripple macroeconomic performance from several fronts.
Analytical approaches
- Two complementary empirical approaches are applied:
- Panel regressions to investigate macroeconomic determinants of NPL and confirm that adverse macroeconomic developments are associated with rising NPL.
- Panel vector autoregressive (PVAR) model to investigate feedback between NPL and its macroeconomic determinants; impulse response functions (IRFs) highlight NPL's central role in linkages between credit market frictions and macrofinancial vulnerability.
Key findings and dynamics
- Adverse macroeconomic developments are associated with rising NPL (established via panel regressions).
- IRFs from the PVAR model attribute a central role to NPL in the linkages between credit market frictions and macrofinancial vulnerability.
- A sharp increase in NPL leads to long-lived adverse effects on macroeconomic performance across multiple channels.
Subject areas and keywords
- Subject: Credit, Financial institutions, Financial statements, Housing prices, Loans, Money, Nonperforming loans, Prices, Public financial management (PFM)
- Keywords: asset quality, Banks, business fluctuations, Credit, Financial statements, Global, higher-than-expected NPL ratio, Housing prices, Loans, macrofinancial linkages, modeling NPL, nonperforming loans, NPL, NPL dynamics, NPL increase, NPL measure, NPL time series, price, unemployment, WP