Work detail

Impact of COVID-19 fiscal measures on Non-Performing Loans

Author: Bc. Tomáš Bajcár
Year: 2022 - summer
Leaders: doc. PhDr. Ing. Ing. Petr Jakubík Ph.D. Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 89
Awards and prizes:
Link: https://dspace.cuni.cz/handle/20.500.11956/173530
Abstract: We study to which extent fiscal measures related to COVID-19 have mitigated credit risk
proxied by non-performing loans (NPLs) in selected European countries. In this respect, we
control for the macroeconomic and bank-specific determinants of non-performing loans. We
limit our empirical analysis to NPLs and fiscal measures that aimed at non-financial
corporations. We utilize a quarterly panel dataset covering the period from 2019 to 2021. We
further employ split according to sectors of economic activity and cover 423 sectors in 23
European countries. The difference GMM estimation for dynamic panel data is utilized. Our
empirical analysis suggests that the following variables significantly affect NPL ratios:
economic growth, employment, nominal effective exchange rate and return on equity. In the
case of the fiscal measures, public guarantees and tax reliefs were found to have a statistically
significant and negative effect on NPLs. This finding supports the notion that during the
COVID-19 pandemic, loan guarantees and lower tax burdens helped businesses maintain
liquidity and solvency, which resulted in reduction of NPL ratios. Contrary, loan moratoria
were found to positively affect NPL ratios. There is mixed evidence regarding direct grants and
no empirical evidence was found in the case of public loans, tax deferrals and other measures
of fiscal nature.
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