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The evolution of loan volume and non-performing loans under COVID-19 innovations: The Colombian case

2023; Elsevier BV; Volume: 9; Issue: 4 Linguagem: Inglês

10.1016/j.heliyon.2023.e15420

2405-8440

Julián Benavides-Franco, Jaime Carabalí-Mosquera, Julio César Alonso Cifuentes, Irvin Taype-Huaman, Guillermo Buenaventura Vera, Luís Ángel Meneses Cerón,

Islamic Finance and Banking Studies

Financial institutions' scale of total and non-performing loans are important figures signaling economic activity and its risk level. COVID-19 created an external shock with overarching effects on the global economy, impacting the credit activity and debtors' ability to repay their obligations. We study how Colombia's loans and non-performing loans market ratios could react to an external shock (absent of any relief measures) by developing a vector autoregressive model with exogenous variables (VARX) with the Central Bank intervention rate as an exogenous variable. We use impulse response functions to simulate the impact of the COVID-19 pandemic on the market of loans and default levels in Colombia. Our results show that the effects remain significant over long periods.