Heliyon (Apr 2023)

The evolution of loan volume and non-performing loans under COVID-19 innovations: The Colombian case

  • Julián Benavides-Franco,
  • Jaime Carabalí-Mosquera,
  • Julio Cesar Alonso,
  • Irvin Taype-Huaman,
  • Guillermo Buenaventura,
  • Luis Angel Meneses

Journal volume & issue
Vol. 9, no. 4
p. e15420

Abstract

Read online

Financial institutions' scale of total and non-performing loans are important figures signaling economic activity and its risk level. COVID-19 created an external shock with overarching effects on the global economy, impacting the credit activity and debtors' ability to repay their obligations. We study how Colombia's loans and non-performing loans market ratios could react to an external shock (absent of any relief measures) by developing a vector autoregressive model with exogenous variables (VARX) with the Central Bank intervention rate as an exogenous variable. We use impulse response functions to simulate the impact of the COVID-19 pandemic on the market of loans and default levels in Colombia. Our results show that the effects remain significant over long periods.

Keywords