Macroeconomic Determinants of Household Credit Risk: Evidence from Non-Performing Loans in Morocco

Abstract

This study examines the impact of macroeconomic determinants on household non-performing loans (NPLs) in Morocco over the period 2005–2024. Its primary objective is to identify the macroeconomic factors influencing the evolution of household credit risk by employing the Autoregressive Distributed Lag (ARDL) modeling approach. The explanatory variables include economic growth, unemployment rate, lending interest rate, inflation rate, and household debt ratio, while the household non-performing loan ratio serves as the dependent variable. Following the assessment of the stationarity properties of the variables using the Augmented Dickey–Fuller (ADF) unit root test, the ARDL model is estimated. Subsequently, the Pesaran, Shin, and Smith (2001) Bounds Test confirms the existence of a long-run relationship among the variables.
The empirical findings reveal that economic growth significantly reduces household non-performing loans, whereas the lending interest rate exerts a positive effect on household credit default risk. The unemployment rate exhibits a lagged effect, while inflation is found to have a negative impact, contrary to theoretical expectations. Conversely, the household debt ratio does not appear to have a statistically significant effect.
Overall, these findings highlight the crucial role of macroeconomic conditions in shaping household credit risk and provide valuable insights for monetary authorities, financial regulators, and banking institutions in designing effective strategies to mitigate the accumulation of household non-performing loans and preserve financial stability.