The Effect of Macroeconomic Indicators on Non-Performing Loans: The Case of Balkan Countries

Abstract

This paper investigates the impact of macroeconomic indicators on non-performing loans at commercial banks in the Balkans. In this research, we calculated how the macroeconomic indicators mentioned below affect non-performing loans and how strong this relationship is. The study of this problem is crucial because the Balkan countries experience economic trends reflected in macroeconomic indicators. In this study, the OLS model was used to examine the relationship between macroeconomic factors and non-performing loans in the study period from 2006 to 2020. We used correlation, regression, and co-integration methods. Non-performing loans (NPLs) were the dependent variable, and the independent variables were gross domestic product (GDP), government debt to GDP ratio, unemployment, and inflation. According to the linear regression model, GDP and inflation negatively impacted non-performing loans, while government debt to GDP ratio and unemployment had a positive effect.