engleski

The Drivers Behind Household and Corporate Non- performing Loans Ratio: The Case of Croatia

We analyse the relationship between non- performing loans (NPL) ratio and Croatia’s macroeconomic performance in the Q4 2001 – Q1 2014 period. Analysis is performed separately for two different loan categories (households and corporate) in order to examine similarities and differences between them. Our results show that the NPL ratio for both categories is strongly affected by the economic slowdown measured by the real GDP and industrial production index. This confirms the significant effect of economic cycles on households’ and companies’ ability to service their liabilities, especially during recession. Unemployment rate is found to be a significant variable for corporate sector and is positively related to corporate NPL ratio. Interest rates have mixed implications on the NPL for both categories depending on the duration of the observation period. In the long run we find a positive relationship between interest rates and NPL ratio, meaning that in the long run higher interest rates worsen the debtors’ loan repayment capacity and refinancing terms. In the short run we find a negative relationship between interest rates and NPL ratio which can be explained by the fact that higher interest rates discourage investments in risky and less profitable ventures.

Vector error correction model ; non-performing loans (NPL) ; macroeconomic determinants ; household finance ; corporate vulnerability

Ovaj rad je nastao uz potporu Hrvatske zaklade za znanost u okviru projekta 6558 Business and Personal Insolvency – the Ways to Overcome Excessive Indebtednes.