Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects

Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects
Author :
Publisher : International Monetary Fund
Total Pages : 26
Release :
ISBN-10 : 9781455208890
ISBN-13 : 1455208892
Rating : 4/5 (892 Downloads)

Book Synopsis Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects by : Mr.Raphael A. Espinoza

Download or read book Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects written by Mr.Raphael A. Espinoza and published by International Monetary Fund. This book was released on 2010-10-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to a dynamic panel estimated over 1995 - 2008 on around 80 banks in the GCC region, the NPL ratio worsens as economic growth becomes lower and interest rates and risk aversion increase. Our model implies that the cumulative effect of macroeconomic shocks over a three year horizon is indeed large. Firm-specific factors related to risk-taking and efficiency are also related to future NPLs. The paper finally investigates the feedback effect of increasing NPLs on growth using a VAR model. According to the panel VAR, there could be a strong, albeit short-lived feedback effect from losses in banks’ balance sheets on economic activity, with a semi-elasticity of around 0.4.

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