Macroeconomic and Institutional Determinants of NPLs

This presentation analyzes the macroeconomic determinants of non-performing loans (NPLs) across multiple countries, highlighting their significance as early warning signals for financial instability in the banking sector. It explores both the short-term and long-term relationships between key economic factors—such as GDP growth, unemployment, inflation, and institutional quality—and the prevalence of NPLs, using advanced empirical methods like cointegration analysis. The findings reveal that economic downturns, rising unemployment, and high inflation are closely linked to elevated NPL levels, with strong negative correlations identified between GDP growth and loan defaults. Policy recommendations emphasize the importance of coordinated macroeconomic policies, robust regulatory frameworks, and institutional strengthening to mitigate risks and promote banking sector resilience worldwide.