HOW DID RAPID CREDIT GROWTH CAUSE NON-PERFORMING LOANS IN CEE COUNTRIES?

Abstract

This paper investigates the influence of four types of credit growth on non-performing loans in eleven Central and Eastern European countries during the period 1999-2013. Considering the previous research of credit risk, we have moved the focus from usually investigated bank specific and macroeconomic variables to different types of credit growth from earlier periods. At the same time the results give answers on studies before the crisis which try to determine the possible consequences of rapid credit growth in CEE countries. The results indicate that two years are necessary for each type of credit growth to increase credit risk. However, results showed that the most dangerous type of credit growth is the growth above bank’s own average. Finally, empirical results confirm importance of bank specific and macroeconomic variables.