Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects

Espinoza, Raphaël; Prasad, Ananthakrishnan

doi:10.5089/9781455208890.001

Cited by 296 publications

(313 citation statements)

References 27 publications

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“…Second, dynamic panel regressions analyze the determinants of NPLs using both country data and detailed bank-level data. The results suggest that deteriorating asset quality can be attributed to both macroeconomic and bank-specific 2 These results are broadly consistent with those in Beaton, Myrvoda, and Thompson (2016) for the ECCU, Tintchev (forthcoming) for commodity-exporting Caribbean countries, Jordan and Tucker (2013) for The Bahamas, and similar studies for other regions (see, for example, Espinoza and Prasad 2010;Beck, Jakubík, and Piloiu 2013;Klein 2013;Nkusu 2011). factors.…”

Section: Introductionsupporting

confidence: 77%

Unleashing Growth and Strengthening Resilience in the Caribbean

Srinivasan¹,

Ötker²,

Ramakrishnan³

et al. 2017

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In its aim to stimulate policy dialogue and help policymakers overcome the challenges that hinder Caribbean economies from fulfilling their potential for growth and development, this book is a timely success. By bringing together up-to-date research on the challenges of weak macroeconomic fundamentals and long-standing structural impediments, it provides insights and policy perspectives that can shape coherent answers to these pressing policy concerns. The book's careful analyses point the way toward opportunities for welfare gains from determined but balanced policy actions targeted at the region's high energy costs, financial exclusion, high crime rates, and the persistent loss of skilled workers to richer countries. Consideration of the vulnerabilities and opportunities that arise from financial interconnectedness across the Caribbean also informs the book's reminder to policymakers of the benefits that remain to be exploited by greater regional cooperation in a number of areas. With its relevance and range of evidence-based policy recommendations, this volume earns its place on the bookshelves of practitioners and other students of Caribbean economic development. -Brian Wynter Governor, Bank of JamaicaThis book provides a comprehensive assessment of three major Caribbean contemporary economic challenges-slow growth, macroeconomic imbalances, and structural impediments. The chapters are skillfully written by Fund economists, who are versed in the various aspects of Caribbean economic issues, to relate the challenges to the vicious cycle. Policy recommendation is an important aspect of the book and addressed at both the individual country and regional levels. This book is a mustread for public policymakers and anyone interested in contemporary Caribbean and small states economic and financial issues.-Dr. Gobind Ganga Governor, Bank of Guyana Economic growth in the Caribbean over the last two decades has been slow, both relative to growth in the region over the previous 20 years and in comparison to other small, non-Caribbean countries. Unleashing Growth and Strengthening Resilience in the Caribbean provides a thorough analysis of the region's subpar economic performance and lays out a practical approach for improvement. The authors highlight key policy changes that merit serious consideration: building greater resilience to increasingly frequent hurricanes; reducing the cost of energy; greater investment in infrastructure; more regional cooperation and integration; microeconomic reforms to reduce the cost of doing business; and countercyclical fiscal policy. But the path to faster sustainable and inclusive growth is different for each of the 13 countries examined in this book, and it's refreshing to see the IMF embark upon a more collaborative, tailored approach to its recommendations for developing countries. This country-specific approach is part of a broader-and greatly welcomed-philosophical change at the Fund, which recognizes that the best kind of economic discipline does not push extreme measures such a...

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Section: Introductionsupporting

confidence: 77%

Unleashing Growth and Strengthening Resilience in the Caribbean

Srinivasan¹,

Ötker²,

Ramakrishnan³

et al. 2017

View full text Add to dashboard Cite

show abstract

“…Nonetheless, other factors such as exchange rate and interest rate movements may also play a role. These …ndings are broadly in line with other cross-country analyses; see, for instance, Espinoza and Prasad (2010), Nkusu (2011), Glen and Mondragón-Vélez (2011), and Klein (2013. With regard to Italy-speci…c studies, using a dynamic panel-data analysis covering the 62 largest Italian banks, Garrido et al (2016) show that while economic growth has been the most important determinant of the NPL buildup following the crisis, this was exacerbated by bank speci…c factors.…”

Section: Introductionsupporting

confidence: 68%

Can Italy Grow Out of Its NPL Overhang? A Panel Threshold Analysis

Mohaddes¹,

Raissi²,

Weber³

2017

gwp

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This paper examines whether a tipping point exists for real GDP growth in Italy above which the ratio of non-performing loans (NPLs) to total loans falls significantly. Estimating a heterogeneous dynamic panel-threshold model with data on 17 Italian regions over the period 1997-2014, we provide evidence for the presence of growth-threshold effects on the NPL ratio in Italy. More specifically, we find that real GDP growth above 1.2 percent, if sustained for a number of years, is associated with a significant decline in the NPLs ratio. Achieving such growth rates requires decisively tackling long-standing structural rigidities and improving the quality of fiscal policy. Given the modest potential growth outlook, however, under which banks are likely to struggle to grow out of their NPL overhang, further policy measures are needed to put the NPL ratio on a firm downward path over the medium term.

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“…Al Hassan et al (2010) analyses the banking sector in the GCC economies, including trends in ownership, balance sheet exposures and risks. Espinosa and Prasad (2010) analyze the delinquent loans in GCC banks and finds that a decline in non-oil GDP growth by 3 percentage points would raise NPLs by roughly 0.3%. None of the studies however investigate the interlinkage between bank lending and their funding structure and this remains central to the empirical inquiry of the paper.…”

Section: Literature Reviewmentioning

confidence: 99%

Funding Structure, Procyclicality and Lending: Evidence from GCC Banks

Ghosh

2013

Review of Middle East Economics and Finance

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The paper examines whether banks' funding structure amplifies procyclicality. Using data for GCC banks for the period 1996-2009, the evidence suggests that banks with higher wholesale dependence cut back lending by a greater amount. In addition, the procyclicality of the financial system and the crisis exacerbates the effect, although the results differ across bank ownership JEL classification: G 21, G 28, P 51

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Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects

Cited by 296 publications

References 27 publications

Unleashing Growth and Strengthening Resilience in the Caribbean

Unleashing Growth and Strengthening Resilience in the Caribbean

Can Italy Grow Out of Its NPL Overhang? A Panel Threshold Analysis

Funding Structure, Procyclicality and Lending: Evidence from GCC Banks

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