Exploring the Determinants of Non-Performing Loans in E-7 Economies: Macroeconomic, Banking Sector and Institutional Dimensions

Authors : Mümin Atalay Çetin

Pages : 427-446

Doi:10.51290/dpusbe.1755854

View : 97 | Download : 450

Publication Date : 2025-10-25

Article Type : Research Paper

Abstract :In emerging market economies, non-performing loans (NPLs) are recognized as a crucial element not only for maintaining financial stability but also for advancing sustainable economic development. This study aims to explore the potential drivers of NPLs in E-7 countries by examining them through three key lenses: macroeconomic conditions, banking sector characteristics, and institutional factors. The analysis is based on data spanning the years 2000 to 2020 and utilizes dynamic heterogeneous panel data methodologies. Based on the long-run estimates derived from the Pooled Mean Group (PMG) estimator, variables such as inflation, real interest rates, the real effective exchange rate, and public debt exhibit a statistically significant and positive influence on NPLs. Conversely, indicators like economic growth, return on assets, credit expansion, banking inefficiency, and institutional quality show a negative correlation with NPLs. The long-term coefficients further highlight institutional quality, bank profitability, inflationary trends, and operational efficiency as prominent determinants of NPLs levels in E-7 economies. These results underscore the necessity for policymakers and regulatory bodies in these countries to integrate these factors into their financial stability strategies to bolster the robustness of the banking sector.
Keywords : Takipteki Krediler, E-7 Ülkeleri, Havuzlanmış ortalama grup tahmincisi

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