NPL Spillovers in Europe: Credit Risk contagion mechanisms

8th Oct 2025 12:30pm - 2pm

Greenwich Campus

KW216

The paper investigates the interconnectedness of non-performing loans (NPLs) among 30 European countries, including the UK, utilising the Diebold-Yilmaz spillover index. Special emphasis is placed on the evolution of NPLs and their contagion dynamics. By employing a linear VAR model of order 2 and Lanne-Nyberg variance decomposition on 12-period-ahead forecast errors, covering the period from 2010Q1 to 2022Q2, the analysis reveals a high total spillover index, indicating a significant degree of NPL connectedness across Europe. The findings highlight a key insight: the trajectory of NPLs post-crisis strongly reflects each country’s economic management during the crisis, with nations that successfully navigated the turmoil emerging as spillover transmitters. These results also emphasise the interplay between macroeconomic stability and credit risk evolution across the region.

Presenter:
Michail Giannoulakis

Location:
University of Greenwich, KW216

Working Paper:  https://gala.gre.ac.uk/id/eprint/51103/

Teams (Online) details:

Meeting ID: 319 421 430 872 5
Passcode: N9eW6W66

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