A Study on the Long-run Association Between Macroeconomic Condition and Non-performing Loan in Banking Sector of Bangladesh
[1]
Md. Kaysher Hamid, Department of Business Administration-General, Faculty of Business Studies, Bangladesh University of Professionals, Dhaka, Bangladesh.
[2]
Farhana Rahman, Department of Organization Strategy and Leadership, Faculty of Business Studies, University of Dhaka, Dhaka, 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
[1]
Bangladesh Bank. (2019). Annual Report 2018-2019.
[2]
Bangladesh Bank. (2014). Annual Report 2013-2014.
[3]
Mishkin, F. S., & Eakins, S. G. (2016). Financial Markets and Institutions. England, UK: Pearson Education.
[4]
Adeola, O., & Ikpesu, F. (2017). Macroeconomic Determinants of Non-Performing Loans in Nigeria: An Empirical Analysis. The Journal of Developing Areas, 51(2), 31-43.
[5]
Ahmad, F., & Bashir, T. (2013). Explanatory Power of Macroeconomic Variables as Determinants of Non-Performing Loans: Evidence from Pakistan. World Applied Sciences Journal, 22(2), 243-255.
[6]
Gremi, E. (2013). Macroeconomic Factors that Affect the Quality of Lending in Albania. Research Journal of Finance and Accounting, 4(9), 50-57.
[7]
Kumarasinghe, P. J. (2017). Determinants of Non-Performing Loans: Evidence from Sri Lanka. International Journal of Management Excellence, 9(2), 1113-1121.
[8]
Marouf, F. Z., & Guellil, Z. (2017, 24-27 May, 2017). The Macroeconomic Determinants of Credit Risk: The Algerian Banking System. Paper presented at the Management International Conference, Italy.
[9]
Mehmood, B., Younas, Z. I., & Ahmed, N. (2013). Macroeconomic and Bank Specific Covariates of Non-Performing Loans (NPLs) in Pakistani Commercial Banks: Panel Data Evidence. Journal of Emerging Economies and Islamic Research (JEEIR), 1(3), 1-15.
[10]
Messai, A. S., & Jouini, F. (2013). Micro and Macro Determinants of Non-Performing Loans. International Journal of Economics and Financial Issues, 3(4), 852-860.
[11]
Muvingi, J., Chirume, C., Chisunga, D., & Kudzai, S. (2017). Modelling the Sensitivity of Zimbabwean Commercial Banks’ Non-Performing Loans to Shocks in Macro-Economic Variables and Micro-Economic Variables:(2009-2014). International Journal of Economic Behavior and Organization, 5(4), 92-99.
[12]
Radivojevic, N., & Jovovic, J. (2017). Examining of Determinants of Non-Performing Loans. Prague Economic Papers, 26(3), 300–316.
[13]
Sheefeni, J. (2015). The Impact of Macroeconomic Determinants on Non-Performing Loans in Namibia. International Review of Research in Emerging Markets and the Global Economy (IRREM), 1(4), 612-632.
[14]
Shingjergji, A. (2013). The Impact of Macroeconomic Variables on the Non-Performing Loans in the Albanian Banking System During 2005-2012. Academic Journal of Interdisciplinary Studies, 2(9), 335-339.
[15]
Mondal, T. (2016). Sensitivity of Non-Performing Loan to Macroeconomic Variables: Empirical Evidence from Banking Industry of Bangladesh. Global Journal of Management and Business Research, 16(4), 21-28.
[16]
Wood, A., & Skinner, N. (2018). Determinants of Non-Performing Loans: Evidence from Commercial Banks in Barbados. The Business & Management Review, 9(3), 44-64.
