MACROECONOMIC FACTORS OF NON-PERFORMING LOANS: THE CASE OF BOSNIA AND HERZEGOVINA

Abstract

This paper examines the key macroeconomic factors of non-performing loans (NPLs) in the banking sector of Bosnia and Herzegovina. The research is conducted on quarterly time series data within the period from 2005 to 2019. The autoregressive distributed lag (ARDL) approach is used to model the long-run and short-run relationship between macroeconomic time series. The research results show that increase in real GDP is associated with decrease in NPLs, while rising unemployment and consumer prices are correlated with higher levels of NPLs at 5% significance level.