Iran Banking Institute Quarterly Studies in Banking Management and Islamic Banking 2588-3569 3 6, 7 2017 12 22 Impact of Fluctuations in Macroeconomic Variables on Non-Performing Loans Impact of Fluctuations in Macroeconomic Variables on Non-Performing Loans 95 130 93372 FA Reza Mohseni Faculty Member, Shahid Beheshti University Maryam Fathian M. A in Financial Engineering Journal Article 2017 07 31      Non-performing loans are one of the most important data used to determine the efficiency of banks as well as the health of banking sector and the effects of financial crisis. In recent years, the increase in non-performing loans needs for more rigorous researches. On the other hand, economic activities have been facing considerable fluctuations in major macroeconomic indicators.     This study, therefore, aims at investigating the impact of fluctuations in macroeconomic variables on non-performing loans over the years 1978-2015 (during the Islamic revolution period) in Iranian banks.     In order to capture the aforementioned relationship, an EGARCH model has been employed. To meet the econometric validity requirements, vector auto regression (VAR) has been used to fit the proper model.     It is shown that the macroeconomic indicators have significant impacts on NPLs, more precisely the ratio of non-performing to total loans. According of the results, most of the long term changes in NPLs are explained by their past values and other important variables including oil revenue, budget deficit, inflation, GDP and unemployment rate.      Non-performing loans are one of the most important data used to determine the efficiency of banks as well as the health of banking sector and the effects of financial crisis. In recent years, the increase in non-performing loans needs for more rigorous researches. On the other hand, economic activities have been facing considerable fluctuations in major macroeconomic indicators.     This study, therefore, aims at investigating the impact of fluctuations in macroeconomic variables on non-performing loans over the years 1978-2015 (during the Islamic revolution period) in Iranian banks.     In order to capture the aforementioned relationship, an EGARCH model has been employed. To meet the econometric validity requirements, vector auto regression (VAR) has been used to fit the proper model.     It is shown that the macroeconomic indicators have significant impacts on NPLs, more precisely the ratio of non-performing to total loans. According of the results, most of the long term changes in NPLs are explained by their past values and other important variables including oil revenue, budget deficit, inflation, GDP and unemployment rate. https://jifb.ibi.ac.ir/article_93372_a025f8030b285b3d696f60505cb2f569.pdf