The effect of macroeconomic indicators on non-performing loans: Sectoral based an applied research in Turkey

Credit risk, which is the most basic type of risk in banking, is expressed as the possibility of the loans not being paid on time and in full. The Non-Performing Loan Ratio (NPLr) is the most important indicator of credit risk. The conditions of the economy in which companies operate affect the repayment power of loans. Increasing credit risk increases the cost of funds of all units in the economy. This situation affects companies' financing preferences, investment decisions and firm value. This study was conducted on the effect of NPL in order to investigate the macroeconomic indicators in terms of commercial loans. It is the first comprehensive study nature broadest application based on sectoral issues in Turkey. In the models in which NPLr is used as a dependent variable, inflation rate, interest rate, unemployment rate, exchange rate and manufacturing industry capacity utilization rate are included as independent variables. Data on commercial loans granted by deposit banks to companies in the manufacturing industry, construction, wholesale-retail trade, hotel-restaurants, transportation-storage-communication and agriculture-hunting-forestry-fishing sectors in the study. The monthly data was used for the period 2011:01-2019:12. VAR analysis, impulse response functions analysis and variance decomposition method were used as econometric methods in the analyzes. As a result of the analysis; inflation rate and exchange rate affect credit risk positively or negatively on sectoral basis, interest rate affects credit risk positively in all sectors, unemployment rate affects credit risk positively in other sectors except hotel and restaurant sector, capacity utilization rate affects credit risk negatively for manufacturing industry sector, or has been found to affect negatively.