NON-PERFORMING LOANS AND THEIR DETERMINANTS: INSIGHTS FROM ECO NATIONS
Keywords:
External Debt Stocks, Unemployment, Inflation, Gdpg & Lending Interest Rate, Population Growth, BLR & CreditAbstract
Non-performing loans pose a significant threat to the stability and sustain. This study examines the determinants of non-performing loans in Economic Cooperation Organization countries. The study has used two separate models. The first model focuses on macroeconomic determinants of non-performing loans along with bank-specific factors, while second model explores the macroeconomic factors only which can contribute to the reduction of NPLs. By using the panel data of ten ECO countries for period 2010-2023. The study employs second-generation methodology by following CD-test which is employed to determine cross-sectional dependence among variables, then slope homogeneity test such as Delta and HAC adjusted data are conducted to determine homogeneity or heterogeneity of the variables. CS-ARDL approach is employed for estimating both short-run and long-run relationship between dependent and independent variables. The outcomes of the study reveal strong positive relationship between external debt stocks, unemployment, inflation, population growth, bank liquid reserves to bank assets ratio, domestic credit to private sector by banks, regulatory quality, government effectiveness, corruption control and NPLs, while GDPG and LR are negatively associated with NPLs.
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