Determinants of non-performing loans in North Macedonia

Figures & data

Table 1. Descriptive Statistics NPL, UN, LGL, LGDP, INT (in level)

	NPL	UNEMPLOYMENT		LGROSS_LOANS		LGDP			INTEREST
Mean	8.614000	27.15429		12.24755		11.72997			7.546714
Median	9.300000	28.65000		12.33131		11.71979			7.460,000
Maximum	16.10000	38.60000		12.93018		12.24417			11.04000
Minimum	2.980000	14.70000		11.00777		11.04219			4.600000
Std. Dev.	3.367931	7.126063		0.506922		0.282783			1.912628
Skewness	0.027600	−0.355073		−0.899559		−0.306561			0.144364
Kurtosis	2.066099	1.820548		3.031769		2.340022			1.775840
Jarque-Bera	2.552717	5.528290		9.443677		2.366847			4.613966
Probability	0.279052	0.063030		0.008899		0.306229			0.099561
Sum	602.9800	1900.800		857.3287		821.0980			528.2700
Sum Sq. Dev.	782.6643	3503.874		17.73093		5.517661			252.4119
Observations	70	70		70		70			70
Descriptive Statistics of dNPL, dUN, dLGL, dLGDP, dINT (in first differences)
	DNPL		DUNEMPLOYMENT		DLGROSS LOANS		DLGDP	DINTEREST
Mean	−0.190145		−0.346377		0.027861		0.016882	−0.092029
Median	−0.100000		−0.300000		0.019571		0.039183	−0.100000
Maximum	1.400000		1.100000		0.096301		0.209005	0.470,000
Minimum	−3.400000		−1.600000		−0.016765		−0.195558	−0.400000
Std. Dev.	0.735016		0.497813		0.025834		0.102661	0.119946
Skewness	−1.225025		0.008340		1.184244		−0.544334	1.538134
Kurtosis	6.992691		3.770606		3.844841		2.308133	10.34149
Jarque-Bera	63.08993		1.708072		18.18003		4.783645	182.1625
Probability	0.000000		0.425693		0.000113		0.091463	0.000000
Sum	−13.12000		−23.90000		1.922411		1.164847	−6.350000
Sum Sq. Dev.	36.73690		16.85159		0.045383		0.716668	0.978316
Observations	69		69		69		69	69
Correlation Matrix of NPL, UN, LGL, LGDP, INT
	NPL		UNEMPLOYMENT		LGROSS_LOANS		LGDP	INTEREST
NPL	1		0.8039		−0.7432		−0.7713	0.7514
UNEMPLOYMENT	0.8039		1		−0.9036		−0.9391	0.9692
LGROSS_LOANS	−0.7432		−0.9036		1		0.9489	−0.9518
LGDP	−0.7713		−0.9391		0.9489		1	−0.9608
INTEREST	0.7514		0.9692		−0.9518		−0.9608	1

Table 2. Zivot-Andrews Unit root test for LNPL, LUN, LINT, LGDP, LGL, and their first differences

Variable	t-statistic	Prob. *	Variable	t-statistic	Prob. *
$\mathit{\text{NPL}}$	−3.5755	0.0000	$\mathit{\text{dNPL}}$
$\mathit{\text{UN}}$	−3.688	0.0583	$\mathit{\text{dUN}}$	−7.6507	0.0479
$\mathit{\text{INT}}$	−4.900	0.0023	$\mathit{\text{dINT}}$
$\mathit{\text{LGDP}}$	−3.278	0.0499	$\mathit{\text{dLGDP}}$	−4.5562	0.0158
$\mathit{\text{LGL}}$	−4.295	0.0002	d $\mathit{\text{LGL}}$

Table 3. The ARDL Critical Value Bounds

Significance	I(0) Bound	I(1) Bound
10%	2.45	3.52
5%	2.86	4.01
2.5%	3.25	4.49
1%	3.74	5.06

Table 4. Estimated ARDL Coefficients (in the short and the long run)

Variable	Coefficient	Standard Error	t-statistic	Probability
D(UN(−1)	−0.8599	0.1873	−4.5910***	0.0000
D(UN(−2)	−0.3972	0.1536	−2.5859**	0.0125
D(INT(−1))	−2.1233	0.7004	−3.0314***	0.0038
D(LGDP)	−2.6862	0.6364	−4.2211***	0.0001
DLGDP(−1)	1.8279	0.6639	2.7532***	0.0081
LUN(−1)	0.6417	0.3192	2.0100**	0.0495
LINT(−1)	3.4731	1.0474	3.3161***	0.0017
LGDP(−1)	−6.7075	2.5174	−2.6645**	0.0102
CointEq(−1)	−1.1001	0.10997	−10.0035***	0.0000
R-squared	0.6538
F-statistic	13.4531			0.0000
DW-statistic	1.9816
Diagnostics	F-statistic	Probability
BG	1.2226	0.3030
BPG	1.3102	0.2407
Ramsey RESET test	0.1537	0.6966
Jarque-Bera	1.827103	0.401019

*** denotes 0.01 significance level, ** 0.05 significance level, * 0.10 significance level. The R-squared and the diagnostics are based on the long-run form, also known as the Error Correction form. (Detailed results are available at the appendix; see tables 6-9).

Table 5. Estimated ARDL Coefficients (in the short-run only)

Variable	Coefficient	Standard Error	t-statistic	Probability
D(UN(−2)	0.4627	0.1895	2.4411**	0.0180
D(UN(−3)	0.3972	0.1804	2.2011**	0.0321
D(INT(−1))	1.5288	0.7892	1.9370*	0.0581
D(INT(−2))	2.1233	0.8049	2.6381**	0.0109
D(LGDP)	−2.6863	1.0354	−2.5944**	0.0122
DLGDP(−1)	−2.8648	1.1537	−2.4832**	0.0162
DLGDP(−2)	−1.8279	1.0223	−1.7880*	0.0795
Variable(s)	F-value of Wald test	Chi^2-value of Wald test	Probability value of F	Probability value of Chi^2
C(2),C(3),C(4),C(5)	3.1101**	12.4404**	0.0226	0.0144
C(6),C(7),C(8)	4.2936***	12.8808***	0.0087	0.0049
C(9),C(10),C(11),	2.7848**	8.3543**	0.0497	0.0392

*** denotes 0.01 significance level, ** 0.05 significance level, * 0.10 significance level. The short-run ARDL is a 1,3,2,2,0. The ordering of the variables, in relation to the reported lags, is as stated on the table above. Moving to joint significance under the Wald test, C(2)−C(5) on Unemployment, C(6)−C(8) on interest rates, and C(9)−C(11) on GDP. C(1) is the lagged NPL and C(13) are the Gross loans C(12) and are insignificant (available at the appendix). Also, Residual and Stability diagnostics are consistent with the econometric expectations and this model is robust as well (for more details see the Appendix; Tables 10-11, respectively).

Figure A1. Variables in level.

Figure A2. Variables in first difference.

Table and Figure 5.1. Zivot-Andrews unit root test on NPL

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 12:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: NPL has a unit root with a structural break in both the intercept and trend
Chosen lag length: 2 (maximum lags: 4)
Chosen break point: 2016Q2
	t-Statistic	Prob. *
Zivot-Andrews test statistic	−3.575502	7.37E-07
1% critical value:	−5.57
5% critical value:	−5.08
10% critical value:	−4.82

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.2. Zivot-Andrews unit root test on unemployment

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 12:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: UNEMPLOYMENT has a unit root with a structural break in both the intercept and trend
Chosen lag length: 2 (maximum lags: 4)
Chosen break point: 2011Q1
	t-Statistic	Prob. *
Zivot-Andrews test statistic	−3.687974	0.058355
1% critical value:	−5.57
5% critical value:	−5.08
10% critical value:	−4.82

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.3. Zivot-Andrews unit root test on interest rates

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 12:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: INTEREST has a unit root with a structural break in both the intercept and trend
Chosen lag length: 2 (maximum lags: 4)
Chosen break point: 2019Q1
	t-Statistic	Prob. *
Zivot-Andrews test statistic	−4.900227	0.002316
1% critical value:	−5.57
5% critical value:	−5.08
10% critical value:	−4.82

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.4. Zivot-Andrews Unit Root Test on LGDP

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 12:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: LGDP has a unit root with a structural break in both the intercept and trend
Chosen lag length: 4 (maximum lags: 4)
Chosen break point: 2015Q3
	t-Statistic	Prob. *
Zivot-Andrews test statistic	−3.277821	0.049959
1% critical value:	−5.57
5% critical value:	−5.08
10% critical value:	−4.82

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.5. Zivot-Andrews unit root test on LGross_Loans

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 12:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: LGROSS_LOANS has a unit root with a structural break in the intercept
Chosen lag length: 2 (maximum lags: 4)
Chosen break point: 2016Q1
		t-Statistic	Prob. *
Zivot-Andrews test statistic		−4.295073	0.000174
1% critical value:		−5.34
5% critical value:		−4.93
10% critical value:		−4.58

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.6. Zivot-Andrews unit root test on dUnemployment

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 13:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: DUNEMPLOYMENT has a unit root with a structural break in the intercept
Chosen lag length: 1 (maximum lags: 4)
Chosen break point: 2013Q1
		t-Statistic	Prob. *
Zivot-Andrews test statistic		−7.650728	0.047902
1% critical value:		−5.34
5% critical value:		−4.93
10% critical value:		−4.58

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table and Figure 5.7. Zivot-Andrews unit root test on dLGDP

Zivot-Andrews Unit Root Test
Date: 08/30/22 Time: 13:08
Sample: 2005Q1 2022Q2
Included observations: 70
Null Hypothesis: DLGDP has a unit root with a structural break in both the intercept and trend
Chosen lag length: 3 (maximum lags: 4)
Chosen break point: 2019Q3
	t-Statistic	Prob. *
Zivot-Andrews test statistic	−4.556190	0.015762
1% critical value:	−5.57
5% critical value:	−5.08
10% critical value:	−4.82

* Probability values are calculated from a standard t-distribution and do not take into account the breakpoint selection process

Table 6. The ARDL results in the short-run

Table 7. On the ARDL results in the short-run. The Wald tests

C(1) is the lagged NPL and is statistically insignificant.

The ARDL results in the short-run

Thus, unemployment, the contemporaneous and from the past jointly influence NPLs.

The ARDL results in the short-run

Thus, interest rates, both the contemporaneous and the past ones, jointly influence NPLs.

The ARDL results in the short-run

Thus, GDP, both the contemporaneous and the past ones, jointly influence NPLs.

Table

Thus, Gross Loans does not influence NPLs.

Table 8. On the ARDL Long Run form and bound tests

Table

Table 9. Cointegration and Long run form or Error Correction form

The cointegration equation is significant and bears a negative sign: CointEq(-1)* -1.100102 0.109971 -10.00354 0.0000

Table 10. On residual diagnostics

Table

Table 11. On stability diagnostics