Macroeconomic Determinants Of Credit Risks: The Case Of Low- And Lower-Middle Income Countries

Faneva Tafita REZIKY STEFANA, Felix RAMANDRAY, Jean RAZAFINDRAVONONA

Abstract


The financial system of low- and middle-income countries is characterized by the difficulty of credit risk management. This study aims to create an effective risk management framework by studying the impacts of the macroeconomic environment on credit risk. It applies the GMM system model in the context of the unbalanced panel data of 43 countries over the period from 2005 to 2021. The results indicated that economic activity variables do not have a significant effect on credit risk, unlike monetary variables.


Keywords


credit risk, systemic risk, non-performing loans, low-income countries, system-GMM

Full Text:

PDF

References


. Ali, A., & Daly, K. (2019). Macroeconomic Determinants of Credit Risk: Recent Evidence from a Cross Country Study. International Review of Financial Analysis, 19(3), 165-171.

. Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations. Review of Economic Studies, 58, 277-297.

. Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 29-51.

. Barth, J., Nolle, D., & and Tara, R. (1997). Commercial Banking Structure, Regulation and Performance: An International Comparison. Working Paper 97-6, Washington: Office of the Comptroller of the Currency.

. Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115-143.

. Bonfim, D. (2009). Credit Risk Drivers: Evaluating the Contribution of Firm Level Information and of Macroeconomic Dynamic. Journal of Banking and Finance, 33, 281-299.

. Carey, M. (1998). Credit Risk in Private Debt Portfolios. Journal of Finance, 53, 1363-1387.

. Castro, V. (2013). Macroeconomic Determinants of the Credit Risk in the Banking System: the Case of the GIPSI. Economic Modelling, 31, 672-683.

. Cortavarria, L., Dziobek, C., Kanaya, A., & Song, I. (2000). Loan review, Provisioning and Macroeconomic Linkage. IMF Working Paper.

. Dimitrios, A., Helen, L., & Mike, T. (2016). Determinants of non-performing loans: evidence from Euro-area countries. Finance Research Letters, 18, 116-119.

. Espinoza, R. A., & Prasad, A. (2010). Nonperforming loans in the GCC banking system and their macroeconomic effects. IMF Working Paper.

. Fainstein, G., & Novikov, I. (2011). The role of macroeconomic determinants in credit risk measurement in transition country: Estonian example. International Journal of Transitions and Innovation Systems, 1, 117-137.

. Fofack, H. (2005). Non-performing Loans in Sub-Saharan Africa: Causal Analysis and Macroeconomic Applications. World Bank Policy Research Working Paper.

. Hwang, J., & Sun, Y. (2018). Should We Go One Step Further? An Accurate Comparison of One-Step and Two-Step Procedures in a Genreralized Method of Moments Framework. Journal of Econometrics, 207, 381-405.

. Jiménez, G., & Saurina, J. (2006). Credit Cycles, Credit Risk, and Prudential Regulation. Banco de España Working Paper.

. Kattai, R. (2010). Credit Risk Model for the Estonian Banking Sector. Eesti Pank Working Paper Series.

. Koju, L., Koju, R., & Wang, S. (2019). Macroeconomic Determinants of Credit Risks: Evidence from High-Income Countries. European Journal of Management and Business Economics.

. Lin, H.-Y., Farhani, N. H., & Koo, M. (2016). The Impact of Macroeconomic Factors on Credit Risk in Conventional Banks and Islamic Banks: Evidence from Indonesia. International Journal of Financial Research, 7.

. Louzis, D. P., Voudlis, A. T., & Metaxas, V. L. (2012). Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios. Journal of Banking and Finance, 1012-1027.

. Makri, V., Tsagkanos, A., & Bellas, A. (2014). Determinants of non-performing loans: the case of Eurozone. Panoeconomicus, 61, 193-206.

. Nikolaidou, E., & Vogiazas, S. (2017). Credit risk determinants in Sub-Saharan banking systems: Evidence from five countries and lessons learnt from Central East and South East European countries. Review of Development Finance, 7, 52-63.

. Nkusu, M. (2011). Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies. IMF Working Paper.

. Otašević, D. (2P15). The Influence of Macroeconomic Risks on Credit Risk in the Serbian Bank's Loan Portfolio. International Finance Review, 16, 219-243.

. Rajan, R. (1994). Why Bank Credit Policies Fluctuate: A Theory and Some Evidence. Quarterly Journal of Economics, 109, 399–441.

. Rakotonirainy, M., Rasolomanana, C. G., & Razafindravonona, J. (2020). Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector. Journal of Central Banking Theory and Practice, 2, 199-218.

. Tanasković, S., & Jandrić, M. (2015). Macroeconomic and institutional determinants of non- performing loans. Journal of Central Banking Theory and Practice, 4, 47-62.

. Warue, B. N. (2013). The Effects of Bank Specific and Macroeconomic Factors on Nonperforming Loans in Commercial Banks in Kenya: A Comparative Panel Data Analysis. Advances in Management & Applied Economics, 3, 135-164.

. Yurdakul, F. (2014). Modelling of Credit Risk for Banks. Procedia Social and Behavioral Sciences, 109, 784-793.




DOI: http://dx.doi.org/10.52155/ijpsat.v48.2.6879

Refbacks

  • There are currently no refbacks.


Copyright (c) 2025 Jean Razafindravonona

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.