Nonperforming Loans in Asia: Determinants and Macrofinancial Linkages
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Against the backdrop of recent rises in nonperforming loans in some Asian economies, this study looks at nonperforming loans, including the determinants, macrofinancial feedback effects, and implications for financial stability.
The empirical study demonstrates that while macroeconomic conditions and bank-specific factors—such as weak gross domestic product growth and rapid credit growth—contribute to the buildup of nonperforming loans, a sustained increase of nonperforming loans can also lead to a reduction in credit supply and slowdown in overall economic activity. These findings underline the importance of considering policy options to swiftly and effectively manage and respond to a buildup of nonperforming loans.