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    Nonperforming Loans in Asia: Determinants and Macrofinancial Linkages

    Lee, Junkyu; Rosenkranz, Peter | March 2019
    Abstract
    The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the implications for financial stability in the region. Using a dynamic panel model, we assess the determinants of the evolution of bank specific NPLs in Asia and find that macroeconomic conditions and bank-specific factors—such as rapid credit growth and excessive bank lending—contribute to the buildup of NPLs. Further, a panel vector autoregression analysis of macrofinancial implications of NPLs in emerging Asia offers significant evidence for the feedback effects of NPLs on the real economy and financial variables. Impulse response functions demonstrate that a rising NPL ratio decreases gross domestic product growth and credit supply and increases unemployment rate. Our findings underline the importance of considering policy options to swiftly and effectively manage and respond to a buildup of NPLs. The national and regional mechanisms underlying NPL resolution are important for safeguarding financial stability in an increasingly interconnected global financial system.
    Citation
    Lee, Junkyu; Rosenkranz, Peter. 2019. Nonperforming Loans in Asia: Determinants and Macrofinancial Linkages. © Asian Development Bank. http://hdl.handle.net/11540/9737. License: CC BY 3.0 IGO.
    ISSN
    2313-6537(print)
    2313-6545(electronic)
    Keywords
    Economic Development
    Economic Infrastructure
    Economic Policies
    Regional Economic Development
    Microfinance Programs
    Public Finance
    Local Financing
    Financial Stability
    Financial Sector Regulation
    Public Financial Management
    Financial System
    Financial Statistics
    Foreign and Domestic Financing
    Financial Inclusion
    Enterprises
    Financial aid
    Economies in transition
    Local Finance
    Local Government
    Insurance Companies
    Banks
    Social Equity
    Pension Funds
    Mutual Funds
    Financial Aspects
    Fiscal Policy
    Social responsibility of business
    Accounting
    Personal budgets
    Cost and standard of living
    Bank accounts
    Credit control
    Regulatory reform
    Banks and banking
    Digital Financial Service
    Pension plans
    Individual retirement accounts
    Employee pension trusts
    Investment management
    Investments
    Multiemployer pension plans
    Keogh plans
    Individual retirement accounts
    Pension plans
    Employee pension trusts
    Pension trusts
    Investment companies
    International banks and banking
    Stock exchanges
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    Citable URI
    http://hdl.handle.net/11540/9737
    Metadata
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    ewp-574-nonperforming-loans-asia-determinants.pdf (324.1Kb)
    Author
    Lee, Junkyu
    Rosenkranz, Peter
    Theme
    Economics
    Finance
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise