Bounds of Macrofinance and the Quality of Credit Portfolio in Emerging Economies

Abstract

In this study, the bound of macrofinance and the quality of Credit Portfolio in 23 emerging economies are investigated using Panel Var Models and Dumitrescu-Hurlin Panel causality tests. The relation between the credit quality, the credit volume, credit to GDP gap, real interest rate, inflation and current deficit are investigated for the years between 1998 and 2015. It is observed that except growth there are strong relations between those variables. There is unidirectional relation between the credit quality and the economic growth. Panel VAR model action and reaction function indicate that the shocks on credit gap, growth and current deficit cause a strong and long term effect on the credit quality. The countries that have been investigated are found to have a steady current deficit and the growth period are mostly had an international effect. It is inevitable not to have such an effect on current deficit and growth. Credit volume and credit deficit also indicate cyclicality and growth accordingly.