How much of non-performing loans can be explained by loan growth? If an increase in loan growth leads to higher profitability but does not necessarily cause non-performing loans to increase in the short run, banks with (managerial) short-termism will be ex ante incentivized to grant more loans...

In this paper, I examine the link between bank credit growth and non-performing loans in an economy with deflationary pressures. Using panel OLS regressions and two-step GMM regressions, I find evidence for the time-varying relationship between bank credit growth and non-performing loans in a...