Macroeconomic Determinants of Households’ Credit Risk: Empiric Evidences from Macedonia

Abstract

In general, the credit risk is considered as more problematic risk for the banking system. Credit given by banks is divided into loans for business and loans to individuals. The effects of the financial and debt crisis are also felt in Macedonia. This is especially noticeable after 2010, from the growth of non-performing loans against total loans granted. The non-performing individuals’ loan is a measure of credit risk of individuals. It is of particular interest to investigate the factors that determine the behavior of non-performing loans to individuals. This study sheds light on the effects that macroeconomic factors have on the credit risk of individuals. The analysis of time series and the rigorous application of the econometric model challenged the strong and significant connection of the risk free interest rate, the index of house prices, the exchange rate and economic growth of the credit risk of individuals. All these factors have a positive relationship with this risk, with the exception of economic growth. It is more than logical that an improvement of economic growth will lower the credit risk of the individual, because the rate of non-performing loans to individuals will decrease. Economic growth means an increase in the opportunities to pay back the loan. Policies with focus on economic growth, could lead to a softening of the credit risk of individuals.

DOI: 10.5901/ajis.2016.v5n3s1p351