Differential Impact Of Macroeconomic And Monetary Conditions On Non-Performing Loans By Debtor Category: Evidence From The Moroccan Banking System

Abstract

Abstract

This study examines the impact of macroeconomic and monetary conditions on non-performing loans (NPLs) across various loan categories in Morocco from 2009 to 2024, utilizing the Autoregressive Distributed Lag (ARDL) approach. The results reveal that the NPL rate for households is not significantly influenced by long-term systemic factors, whereas non-financial firms are considerably affected by macroeconomic conditions. In the short term, inflation emerges as a crucial factor that positively influences NPLs for both households and corporations, with a more significant effect observed among households. Currency depreciation appears to bolster the financial stability of non-financial corporations, while negatively impacting households, though its effect weakens over time. Additionally, higher interest rates are linked to a temporary reduction in NPLs, as they tend to discourage borrowing. Interestingly, an increase in the money supply generally raises NPL rates for non-financial firms but lowers them for households, as increased access to funds allows individuals to better fulfill their financial obligations. These findings underscore the differential effects of external conditions on NPLs for non-financial firms compared to households. Therefore, financial institutions should consider these economic factors and their distinct impacts when assessing asset quality, and policymakers should take into account the varying influences of macroeconomic elements on the financial health of different institutional sectors when devising macroprudential policies.

Keywords

Non-performing loans, macroeconomic and monetary conditions, impact, Morocco.