Institutional and Fiscal Determinants of Non-Performing Loans: Empirical Evidence from the Post-COVID-19 Period
- 1 Troy High School, Fullerton, CA, USA
Abstract
This paper investigates the fiscal, institutional, and macroeconomic determinants of non-performing loans derived from 122 countries globally. Through regression analysis, the results of this paper show that non-performing loans exhibit significant and negative relationships with institutional indicators such as rule of law, government effectiveness, and political stability as well as fiscal indicators such as subsidies and government debt. The one significant positive deterministic variable observed is interest payments. These findings suggest the crucial roles institutional quality and fiscal policy play in controlling the level of non-performing loans in an economy. This paper contributes to the existing literature on NPL determinants and offers policy implications for improving financial stability.
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