Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/213521
Authors: 
Chiesa, Gabriella
Mansilla-Fernández, José Manuel
Year of Publication: 
2018
Series/Report no.: 
Quaderni - Working Paper DSE 1124
Abstract: 
This paper develops a theoretical model as a foundation of empirical analysis of the transmission channel of non-performing loans (NPLs) on bank cost of capital, credit and liquidity creation in the Eurozone. Empirical results confirm the model's predictions and suggest that holding non-performing loans increases the cost of capital for banks in the short-term and the long-term. Moreover, the increased cost of capital reduces credit and liquidity creation, and the more so the less capitalized is the bank. This phenomenon is found to be economically more significant for European periphery country banks than for core country banks. The identification of the transmission channel is robust to the Granger predictability test.
Subjects: 
Cost of capital
credit supply
liquidity creation
NPLs
sovereign debt crisis
JEL: 
G11
G21
G32
H63
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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