Khouangvichit Chintana: The relationship between macroeconomic factors and nonperforming loans (NPLs) in Lao PDR: an application of the Vector Error Correction Model.
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Abstract
The role of the banking sector in driving economic development cannot be understated. Its stability is a critical factor that sets the pace for economic progress. Among the various indicators of financial stability, non-performing loans (NPLs) held by banks hold particular significance as they reflect asset quality, credit risk, and the efficient allocation of resources to productive sectors. NPLs have indeed been a subject of concern for the banking sector, with their prominence intensifying, especially after the 2008 financial crisis. This study investigates the relationship between Macroeconomic factors and non-performing loans in Lao PDR. The secondary data of four variables, namely, Interest Lending rate, CPI-Inflation, Nominal exchange rate, and Money supply from the first quarter of 2012 to the last quarter of 2021 have been collected in order to analyze the long-term relationship among economic factors and estimate the short-term adjustment toward the long-term equilibrium level. The Vector Error Correction Model (VECM) is applied to measure short-term adjustment toward the long-term equilibrium level. Based on the estimation results of the Vector Error Correction Model, two variables have a positive and significant effect on long-term non-performing loans, namely, lending interest rate, and money supply, and a significant inverse relationship with inflation, and exchange rate. Meanwhile, in the short term, only lending interest rates have a significant effect on non-performing loans.
| Item Type: | Conference or Workshop Item |
|---|---|
| Journal or Publication Title: | Green and Digital Transitions: Global Insights into Sustainable Solutions |
| Date: | 2024 |
| ISBN: | 978-963-306-972-1 |
| Page Range: | pp. 154-173 |
| Language: | English |
| Publisher: | Szegedi Tudományegyetem Gazdaságtudományi Kar |
| Place of Publication: | Szeged |
| Event Title: | Decades of crises: from competitiveness to resilience via the bumpy road of sustainability |
| Event Type: | Conference |
| Event Location: | Szeged |
| Event Dates: | 2023. április 14-15. |
| Related URLs: | https://acta.bibl.u-szeged.hu/84842/ |
| DOI: | 10.14232/gtk.gdtgiss.2024.10 |
| Uncontrolled Keywords: | Makrogazdaság |
| Additional Information: | Bibliogr.: p. 171-172. ; összefoglalás angol nyelven |
| Subjects: | 05. Social sciences 05. Social sciences > 05.02. Economics and business |
| Date Deposited: | 2024. May. 08. 10:46 |
| Last Modified: | 2024. May. 08. 10:46 |
| URI: | http://acta.bibl.u-szeged.hu/id/eprint/84852 |
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