Approaches to the Impact of Non-Performing Loans on the Romanian Economy

Abstract

Non-performing loans (NPLs) are a financial item that affects bank profitability by reducing banks' income from lending and increasing non-performing loans at the industry level. This phenomenon is associated with a decrease in lenders' financial capacity due to inflation and exchange rate instability. We aim to analyze the impact of non-performing loans on the Romanian economy based on an econometric model for the period 2010-2021 using financial indicators on bank non-performing loans in correlation with macroeconomic indicators such as unemployment, inflation, GDP deflator and general government final consumption expenditure. The methods used consist of literature review on non-performing loans, consolidation of a database, application of econometric modelling techniques using linear regression. The results of the study support the possibilities of reducing the negative impact of non-performing loans through macroeconomic recovery and smart financial allocation.

Keywords

• econometric model
• inflation
• non-performing loans
• economic growth