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Open AccessArticle

Analysis of Tail Dependence between Sovereign Debt Distress and Bank Non-Performing Loans

1
Business School, Zhengzhou University, Zhengzhou 450001, China
2
Division of Science and Mathematics, University of Minnesota-Morris, Morris, MN 56267, USA
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(2), 747; https://doi.org/10.3390/su12020747
Received: 3 January 2020 / Revised: 16 January 2020 / Accepted: 17 January 2020 / Published: 20 January 2020
We investigate the tail dependence between sovereign debt distress and bank non-performing loans (NPLs) using a large sample of developed and emerging countries in recent decades. Considering the feedback loop of sovereign debt and bank loan distress, we use three copula models to analyze the asymmetry of tail dependence structure between sovereign debt exposure and bank NPLs. We use the Gaussian copula marginal regression to control the concurrent impact of other macroeconomic variables. We provide evidence that sovereign debt indicates an important determinant of NPLs. We also find that there is tail dependence between sovereign debt distress and bank NPLs, whereas the tail dependence coefficients vary across countries. Our findings shed light on the influence of fiscal distress on bank loan distress and provide immediate implications for the design of macro prudential and financial policy. View Full-Text
Keywords: non-performing loans; sovereign debt distress; tail dependence; gaussian copula regression non-performing loans; sovereign debt distress; tail dependence; gaussian copula regression
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MDPI and ACS Style

Liu, L.; Liu, Y.-M.; Kim, J.-M.; Zhong, R.; Ren, G.-Q. Analysis of Tail Dependence between Sovereign Debt Distress and Bank Non-Performing Loans. Sustainability 2020, 12, 747. https://doi.org/10.3390/su12020747

AMA Style

Liu L, Liu Y-M, Kim J-M, Zhong R, Ren G-Q. Analysis of Tail Dependence between Sovereign Debt Distress and Bank Non-Performing Loans. Sustainability. 2020; 12(2):747. https://doi.org/10.3390/su12020747

Chicago/Turabian Style

Liu, Li; Liu, Yu-Min; Kim, Jong-Min; Zhong, Rui; Ren, Guang-Qian. 2020. "Analysis of Tail Dependence between Sovereign Debt Distress and Bank Non-Performing Loans" Sustainability 12, no. 2: 747. https://doi.org/10.3390/su12020747

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