Non-Performing Loans, Bank Size, GDP, Exchange Rates, Inflation, and Interest Rates in Spain

English

Abstract

This study looks into how economic factors affect non-performing loans.The European
Central Bank (ECB) is the source of the secondary data used in this study. utilizing
quantitative techniques and the VECM (Vector Error Correction Model). Non-performing
loans (NPL), bank size, GDP, currency rates, inflation, and interest rates are all used in this
study. We found that Non-performing loans in the past have encouraged an increase in
current non-performing loans. Of particular interest is the relationship between bad loans
and GDP. GDP encourages problem loans. However, non-performing loans actually put
pressure on GDP. Likewise, inflation puts pressure on non-performing loans. However,
non-performing loans pushed up inflation. In a similar vein, the exchange rate promotes
non-performing loans; the stronger the currency, the more non-performing loans promote
an expansion of credit. The poorer the currency rate, however, the greater the amount of
non-performing loans. Interest rates encourage problem loans and vice versa. And bank
size has a reciprocal relationship with problem loans