The Impact of Financial Development and Macroeconomic Fundamentals on Nonperforming Loans among Emerging Countries: An Assessment Using the NARDL Approach

The relationship between financial development indicators and non-performing loans (NPLs) has garnered significant attention, especially in emerging countries. puzzle of whether sector increases or decreases Non-performing Loans (NPL)s not been resolved to the satisfaction curious mind. This research attempts answer above question by studying asymmetric symmetric association NPLs, utilizing novel non-linear autoregressive distribution lag (NARDL) linear (ARDL) approach. Moreover, make study inclusive, we have added a series proxies measure macroeconomic vulnerabilities. Our main findings confirm that NPLs move together long run, there is evidence relationship. We infer react differently negative positive shocks variables both short run. In long-run intermediation, banking efficiency, depth, stability index, non-interest income significantly impact (financial intermediation size banks) increase countries vice-versa. Furthermore, regarding variables, shock inflation, unemployment, interest rate positively affect NPLs. empirical analysis also concludes foreign bank presence an insignificant factor affecting selected emphasizes that, unlike model, model provides more realistic robust result highlighting hidden asymmetries, which will help policymakers appropriate strategic decisions.