A Study on the Long-run Association Between Macroeconomic Condition and Non-performing Loan in Banking Sector of Bangladesh
This paper attempts to investigate the long-run association between macroeconomic condition and non-performing loan in perspective of the banking sector of Bangladesh. To fulfill the objective, gross domestic product per capita growth, rate of inflation, interest rate spread, exchange rate, and unemployment rate are considered as the indicators of macroeconomic condition and non-performing loan to total gross loan ratio is incorporated as the measure of non-performing loan. Data of the selected variables have been collected for the period of 1997-2017 from the World Development Indicators of World Bank and Annual reports of Bangladesh Bank. In the test of stationarity, the variables are found non-stationary at level. However, the variables are stationary at the first difference. Based on the stationary data set, Johansen Cointegration test is conducted. In cointegration test, the study has identified the presence of long-run association between macroeconomic condition and non-performing loan in context of the Bangladeshi banking sector. It interprets that in case of the changes in macroeconomic condition with proper policy action the level of non-performing loan can be influenced for the best interest of the economy.
Non-performing Loan, Macroeconomy, Banking Sector, Bangladesh
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