Research

Syazwani Kepli · Yasmin Bani · Anitha Rosland · Nisful Laila ·International Journal of Economics and Management ·2021 ·JEL: G21, E44

Financial institutions like commercial banks play important role in the financial system by helping countries to grow and provide capital and platform for investors. However, banks need to be able to generate income in their lending business and perform efficiently. Nonperforming loans (NPLs) is one of the tools to determine the efficiency of lending institutions in which reflect the quality of the credit portfolio as well as the health of the banking sector. High levels of NPLs in the banking system places the banks in risky situation which may lead to limited financial activities and consequently lower investment and growth. Motivated by this scenario, this study examines the determinants of NPLs in the Malaysian banking system. Using annual data from 1988 to 2018, the study estimates the short and long-run dynamics of several determinants using the Auto-Regressive Distribution Lag (ARDL) cointegration approach. The empirical results demonstrate mixed results. In the long-run, exchange rate is positive and significantly related to non-performing loans, while industrial production and money supply are negative and significant. However, inflation does not have significant effect on NPLs in Malaysia. The findings of this study is useful in assisting the banking institutions and policy makers to design macro and fiscal policies.

M.S.M Khair-Afham · Anitha Rosland ·International Journal of Economics and Management ·2022 ·JEL: E44, E51

This study has examined the impacts of credit supply shocks and other common economic shocks (aggregate demand & supply and monetary shocks) on Malaysia's macroeconomic variables, using the Bayesian structural vector autoregressive (SVAR) model and employing sign restrictions. The results showed that an expansionary credit supply shock positively affected the Malaysian economy, consistent with the existing literature. Based on the variance decomposition finding, credit supply shocks explained a significant portion of the anticipated variation in the GDP growth, inflation, and, most importantly, credit growth in Malaysia. This study further decomposed total private non-financial corporate loans into two components: households and non-financial firms. Unlike other economies that have extensively researched this subject matter (US, UK, Euro Area), the growth rate of households and non-financial firms differed greatly in Malaysia. The empirical findings revealed considerable distinctions between these two components, indicating that different treatments or policy formulations are required rather than employing the same policy to boost or govern Malaysia's credit market