Open AccessEstimating the Impact of Credit Risk Determinants in two Southeast European Countries: A Non-Linear Structural VAR Approach.
Author(s) -
Michail Karoglou,
Konstantinos Mouratidis,
Sofoklis Vogiazas
Publication year - 2018
Publication title -
review of economic analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.101
H-Index - 1
ISSN - 1973-3909
DOI - 10.15353/rea.v10i1.1508
Subject(s) - bulgarian , spillover effect , economics , volatility (finance) , econometrics , autoregressive model , romanian , vector autoregression , monetary economics , interest rate , credit risk , financial economics , macroeconomics , actuarial science , philosophy , linguistics
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.