Estimating the Impact of Credit Risk Determinants in two Southeast European Countries: A Non-Linear Structural VAR Approach.

  • Michail Karoglou Aston Business School, Economics and Strategy Group
  • Konstantinos Mouratidis University of Sheffield Department of Economics 9 Mappin Street Sheffield,S1 4DT UK
  • Sofoklis Vogiazas Black Sea Trade and Development Bank

Abstract

We study the impact of credit risk determinants on the Romanian and Bulgarian banking systems using a structural Markov Regime-Switching vector autoregressive (MRS-SVAR) analysis. To capture changes in the domestic macroeconomic conditions as well as the spillover effects from the Greek crisis we account for endogenous breaks in the mean and/or volatility dynamics. Our empirical results suggest that an increase of interest rate also increases the Romanian and Bulgarian credit risk in the short-run while in the medium and long-run it reduces it. We also find evidence of spillover effects from the Greek crisis on both the Romanian and Bulgarian banking system, which interestingly, are imminent in the low volatility regime.

Author Biographies

Michail Karoglou, Aston Business School, Economics and Strategy Group
Konstantinos Mouratidis, University of Sheffield Department of Economics 9 Mappin Street Sheffield,S1 4DT UK

 

May 15th, 2017

 

 

 

 

Dear Editor:

 

 

 

I would like to submit my joint paper with M. Caglayan and O. Kandemir Kocaaslan titled “Uncertainty Effects of Inflation on Output: A MRS-IV Approach” to be considered for potential publication at the Review of Economic Analysis . Thank you very much for your consideration.

 

 

 

 

 

Yours sincerely,

 

 

 

Dr Kostas Mouratidis

University of Sheffield

Department of Economics

9 Mappin Street

Sheffield, S1 4DT

 

Sofoklis Vogiazas, Black Sea Trade and Development Bank
Published
2018-01-07
Section
Articles