Title: A VAR analysis of the macroeconomic shocks on the non-performing loans ratio in Slovakia

Authors: Kristina Kocisova

Addresses: Faculty of Economics, Department of Banking and Investments, Technical University of Košice, Nemcovej 32, 04001, Košice, Slovak Republic

Abstract: This paper presents the key findings of our research on the relationship between selected variables (macroeconomic and banking sector-specific) and the ratio of non-performing loans (NPLs) to total loans in the Slovak banking sector. Our analysis spans from 2006:Q1 to 2022:Q4 and uses a vector autoregressive model (VAR), the unit root technique, Granger causality, impulse response functions, and forecast variance decomposition. We focus on significant macroeconomic variables such as gross domestic product growth rate, inflation rate, unemployment rate, 3M EURIBOR, monetary aggregate M3, and banking sector-specific variables, including return on assets and capital adequacy. Our research assesses the resilience of the Slovak banking sector to shocks from these variables, providing insights into the impact of macroeconomic and banking variables on the NPL ratio. We also offer a projection of NPL ratio trends for the upcoming year.

Keywords: macroeconomic analysis; NPLs; non-performing loans; VAR; vector autoregressive model; granger causality; impulse response analysis; decomposition of dispersion.

DOI: 10.1504/IJMEF.2025.145193

International Journal of Monetary Economics and Finance, 2025 Vol.18 No.1, pp.1 - 23

Received: 21 Dec 2023
Accepted: 20 Apr 2024
Published online: 25 Mar 2025 *

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