Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208223
Authors: 
Consolo, Agostino
Malfa, Federica
Pierluigi, Beatrice
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2189
Abstract: 
This paper presents new evidence on the importance of insolvency frameworks for private sector debt deleveraging and for the resolution of non-performing loans (NPL). We construct an aggregate insolvency framework index (IFI), which is used as explanatory variable in the empirical analysis. By means of panel estimates over 2003-2016, we show that OECD countries with better IFI deleverage faster and adjust their NPL levels more rapidly than countries with worse IFI. We also show that there is a strong correlation between the level of NPL and IFI, which appears to be state-dependent, i.e. in a situation of high unemployment relative to its historical average the NPL ratio is generally lower for a higher IFI. Finally, our results indicate that better insolvency frameworks lead to faster NPL reductions and to lower NPL increases during economic bad times.
Subjects: 
private debt
non-performing loans
insolvency frameworks
panel estimates
JEL: 
C23
E02
E05
O52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3294-3
Document Type: 
Working Paper

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