10/2017 Karsten Staehr, Lenno Uusküla. Forecasting models for non-performing loans in the EU countries
Working Papers of Eesti Pank 10/2017
This paper estimates panel data models that use macroeconomic and macrofinancial variables to forecast the ratio of non-performing loans to total loans. The panels consist of either all EU countries or various subgroups, and the time sample is 1997Q4 to 2017Q1. The estimations show that macroeconomic and macro-financial variables have important roles in forecasting nonperforming loans. The ratio of non-performing loans exhibits substantial persistence and higher GDP growth, lower inflation and lower debt are robust leading indicators of the ratio of lower non-performing loans. The current account balance and real house prices are important indicators for Western Europe but are less important for Central and Eastern Europe.
JEL Codes: E44, E47, G21
Keywords: non-performing loans, forecasting, financial stability
Corresponding author’s e-mail address: lenno.uuskyla [at] eestipank.ee
The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank or the Eurosystem.