Beyond inflation: The impact of energy prices on non-performing loans in the EU
Beyond inflation: The impact of energy prices on non-performing loans in the EU

Summary/Abstract: This article analyses the level of non-performing loans (NPLs)in the European Union (EU) countries between 2014 and 2022, tak-ing into account both standard and new proposals for variables suchas energy prices. Using the econometric ARDL panel model, the tradi-tionally used inflation indicators were replaced with a proposed energyprice indicator, including normalised oil, natural gas, coal and CO₂emission allowance (ETS) prices. The model results suggest that theenergy price index can provide more valuable information about thelevel of NPLs than traditional inflation measures such as the HICP. Inaddition, a preliminary study of the impact of the share of renewableenergy on the level of NPLs has shown that countries with a highershare of renewable energy are less susceptible to fluctuations in ener-gy prices, which ultimately positively impacts financial stability. Theresults indicate that an in-depth energy market analysis can signifi-cantly enrich the understanding of financial stability in the contextof the level of non-performing loans (NPLs).

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