Macroeconomic and Bank Specific Covariates of NonPerforming Loans (NPLs) in Pakistani Commercial Banks: Panel Data Evidence
DOI:
https://doi.org/10.24191/jeeir.v1i3.133Keywords:
Non Performing Loans, Economic Growth, Fixed Effects Estimation with Driscoll and Kraay standard errorsAbstract
Non-performing loans has become an important part of commercial banking of a country. This paper empirically tests the macroeconomic and bank-specific covariates of non-performing loans for a panel of 13 commercial banks for period of 2003-2012. Using fixed effects with Driscoll and Kraay standard errors, the influence of macroeconomic and bankspecific covariates is found meaningful. Recommendations include the policy steps to complement the sound financial system with a healthy macroeconomic environment to reduce non-performing loans in commercial banks in Pakistan. Moreover, need is highlighted for a policy approach with emphasis on the apposite credit culture and lending policy designed with pertinent economic and financial factors.
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