Effects of macroeconomic shocks on banking sector loan quality in Kenya
Shammah, Wema Oduor
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This a paper uses two approaches to analyse the link between loan quality and macroeconomic performance. First evaluating the interaction between different macroeconomic factors using panel regressions second applying a panel vector autoregressive model in modelling the same macro-financial interactions. Using panel datafrom banks 31 banks spanning between 2001 to 2018, results show that money supply is the main macro-economic factor that influences loan quality in Kenya. Impulse response fimctions are used to how that macro-economic shocks take time reduce or increase loan quality in Kenya.