IMPACT OF ECONOMIC FACTORS ON NPL OF PAKISTAN

Abstract

Purpose This study is conducted to in order to enable us to determine and understand the influence of Macroeconomic Variables, which includes Gross Domestic Product (GDP), Inflation (INF), Unemployment (UN EMP) and Exchange Rate (EXR) on Non - Performing Loans (NPL). The relationship of previously mentioned variables has been derived by the data of 24 years i.e. from 1995 to 2018, of Pakistan. This study highlight the factors that hikes the NPL ofthe country and will help in reducing its NPL. Methodology & Design As this study identifies the connection of GDP, INF, EXR and UN EMP on NPL, the data of Pakistan for these variables has been extracted from various authentic sources. This research has been conducted using a secondary data and sources of its acquisition are World Bank, State Bank of Pakistan (SBP), Pakistan Bureau of Statistics (PBS) and Knoema data, which is verified by International Monetary Funds (IMF). The independent variables ofthis paper are GDP, INF, EXR and UN EMP, whereas, the dependent variables is the NPL. The design ofresearch applied in this paper is Explanatory Research Design. Time Series Tests is be applied to test at the data, which has enabled us to understand the affinity of all the independent variables with the dependent variables. There are six different time series tests, which are used for this paper to determine the correlation amongst the dependent i.e NPL and GDP, EXR, INF, UN EMP, which are the independent variables.