Non-Performing Loans and Macroeconomics Factors: The Italian Case

Matteo Foglia

doi:10.3390/risks10010021

Abstract

The purpose of this work is to investigate the influence of macroeconomics determinants on non-performing loans (NPLs) in the Italian banking system over the period 2008Q3–2020Q4. We mainly contribute to the literature by being the first empirical article to study this relationship in the Italian context in the recent period, thus providing fresh evidence on the macroeconomic impact on NPLs, i.e., on the credit risk of Italian banks. By employing the Autoregressive Distributed Lag (ARDL) cointegration model, we are able to investigate the short and long-run effects of macroeconomic factors on NPLs. The empirical findings show that gross domestic product and public debt have a negative impact on NPLs. On the other hand, we find that the unemployment rate and domestic credit positively influence impaired loans. Finally, we find evidence of the “gamble for resurrection” approach, i.e., Italian banks tend to support “zombie firms”.

Highlights

In order to investigate the relationship between non-performing loans (NPLs) and macroeconomics determinants, we use the Autoregressive Distributed Lag (ARDL) cointegration model proposed by Pesaran et al (2001)2
After checking for the existence of cointegration between NPLs and the macroeconomic factors, we obtain the estimates of the long-run coefficients
We investigated the relationship between NPLs and the macroeconomic environment in the Italian context in the period 2008–2020

Summary

Introduction

Non-Performing Loans and Macroeconomics Factor: The Italian. Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Objectives

Methods

Results

Discussion

Conclusion