DYNAMICS OF NON-PERFORMING LOANS IN AZERBAIJAN: EMPIRICAL ANALYSIS
DYNAMICS OF NON-PERFORMING LOANS IN AZERBAIJAN: EMPIRICAL ANALYSIS

Summary/Abstract: Increase of NPL rates in crisis periods creates environment for increasing risks for financial system. Bank loans are main source of financing businesses in the countries with non-developed financial markets like Azerbaijan. Hence, analysis of dynamics of non-performing loans in Azerbaijan has uttermost importance. The purpose of this study is to analyze dynamics of NPL in Azerbaijan. Econometric methods - “FMOLS” regression is applied using Eviews software. The information base of the study is based on the World Bank database, Federal Reserve Economic Database, The State Statistical Committee of the Republic of Azerbaijan and Central Bank of the Republic of Azerbaijan databases. Lack of statistical database on government support to financing of businesses and change in consumption and saving behaviors of people during pandemic are restrictions of research. Significant negative link is detected between NPL rates and macroeconomic factors like inflation and lending rates. As a policy recommendation, it is proposed that government should improve regulations on collateralization of loans and banks’ loan policies. Theoretical and methodological results of the work can serve as a scientific source for further research and can be used in monetary policy of government.

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