Macroeconomic Indicators Affecting Non-Performing Loans in Western Balkan Countries: A Panel Regression

Abstract

The main objective of the thesis is to analyze the macroeconomic values affecting the non-performing loans as well as the relationship between them and to prove that the situation is similar in the Balkan Region. The data that are analyzed in the thesis are obtained from Albanian Association of Banks and the World Trade Economics. The independent variables consist of unemployment, economic growth, inflation, interest rate and the dependent variable is the non-performing loans. The time period of the data analyzed is from 2000-2014 so it is a 15 year range. The analysis is conducted through panel regression method and the data are obtained yearly. A comparative analysis between the states of Balkan region like Greece, Croatia Macedonia, Montenegro and Serbia proves a parallel situation in the region.. Non-performing loans often respond to indicators such as unemployment, economic growth, inflation and most importantly interest rates. The result of the study are that there is a negative impact on the 10 % significance level between the depended variable and the independent variable of interest rates. For the other independent variables the test results showed that there is no impact. This shows that all the Balkan Region countries have in common the fact that a change in interest rate has a direct effect on the non-performing loans..