PANEL INVESTIGATION OF THE FACTORS DETERMINING THE SUPPLY OF BANK LOANS IN BULGARIA USING MICROECONOMIC DATA
DOI:
https://doi.org/10.2478/eoik-2025-0076Keywords:
bank lending, bank loans supply, bank efficiency, panel econometrics, panel ARDL, cointegration, error-correction term, Pooled Mean Group Estimation of PanelsAbstract
This paper studies the factors affecting Bulgarian commercial banks’
loan supply over the period between Q1 2007 and Q4 2024. The anal-
ysis employs a panel of indicators derived from individual (micro-
economic) commercial banks’ balance sheets and income statements,
alongside macroeconomic variables. Combining cointegrated I(0) and
I(1) data suggests the use of the Pooled Mean Group (PMG) ARDL
model in panel data of Pesaran, et al. (1999). Our main findings are that
the capital adequacy ratio (CAR), cost-to-income ratio (CTOI), yield
on government bonds, and return on assets (ROA) exhibit negative as-
sociation with loan growth, while market share (MS), loan-to-deposit
ratio, interest rate on liabilities, GDP growth, housing prices, and infla-
tion positively influence lending activity. The negative value of the Er-
ror-correction term of -0.11 and the p-value of 0.016 support the validi-
ty of a long-run relationship, indicating that loan growth adjusts toward
the equilibrium state at a speed of 11% per quarter. Short-run dynamics
reveal that changes in CAR, market share, and loan-to-deposit ratios
significantly affect loan growth, while bank lending, economic growth,
and bank efficiency indicators display lagged effects. The results of this
study offer important insights into the operation of credit markets in
small, open, and bank-dependent economies such as Bulgaria.
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