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Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states

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Abstract

This study examines selected macroeconomic and bank-specific determinants of non-performing loans (NPLR) for a panel of 21commercial banks from the Baltics States (Estonia, Latvia and Lithuania), using annual data for the period 2005–2016. To avoid the risk of providing unconsistent and biased results by using only one estimation technique, in our study we implemented three alternative estimation models (fixed- effects model, difference Generalized Method of Moments and system Generalized Method of Moments). Empirical results provide evidence that the most important macroeconomic factors influencing NPLR are growth of GDP, public debt, inflation and unemployment. As for the bank-specific determinants, we found that equity to total assets ratio, return on assets, return on equity and growth of gross loans have an impact on the amount of NPLR.

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Authors and Affiliations

  1. Silk Road Bank, Pitu Guli 5, Ohrid, Republic of Macedonia

    Jordan Kjosevski

  2. Faculty of Economics, University Ss. Cyril and Methodius, Skopje Blvd Goce Delchev 9V 1000, Skopje, Republic of Macedonia

    Mihail Petkovski

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  1. Jordan Kjosevski
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  2. Mihail Petkovski
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Correspondence to Jordan Kjosevski.

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Kjosevski, J., Petkovski, M. Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states. Empirica 48, 1009–1028 (2021). https://doi.org/10.1007/s10663-020-09491-5

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