The evolution of loan volume and non-performing loans under COVID-19 innovations: The Colombian case

Financial institutions' scale of total and non-performing loans are important figures signaling economic activity and its risk level. COVID-19 created an external shock with overarching effects on the global economy, impacting the credit activity and debtors' ability to repay their obligat...

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Veröffentlicht in:Heliyon 2023-04, Vol.9 (4), p.e15420-e15420, Article e15420
Hauptverfasser: Benavides-Franco, Julián, Carabalí-Mosquera, Jaime, Alonso, Julio Cesar, Taype-Huaman, Irvin, Buenaventura, Guillermo, Meneses, Luis Angel
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Sprache:eng
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Zusammenfassung:Financial institutions' scale of total and non-performing loans are important figures signaling economic activity and its risk level. COVID-19 created an external shock with overarching effects on the global economy, impacting the credit activity and debtors' ability to repay their obligations. We study how Colombia's loans and non-performing loans market ratios could react to an external shock (absent of any relief measures) by developing a vector autoregressive model with exogenous variables (VARX) with the Central Bank intervention rate as an exogenous variable. We use impulse response functions to simulate the impact of the COVID-19 pandemic on the market of loans and default levels in Colombia. Our results show that the effects remain significant over long periods. •Banking Loan volumes and non-performing loan ratios suffered a shock under the pandemic stress.•VARX models are suitable tools for studying impulse-response functions of these interrelated variables.•Exogenous variables and non-independence assumptions provide richer empirically relevant responses.•Most shocks have significant responses over time, requiring adequate policy measures to avoid permanent adverse outcomes.
ISSN:2405-8440
2405-8440
DOI:10.1016/j.heliyon.2023.e15420