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The evolution of loan volume and non-performing loans under COVID-19 innovations: The Colombian case
Julián Benavides-Franco1, Jaime Carabalí-Mosquera1, Julio Cesar Alonso1
1Universidad Icesi, Facultad de Ciencias Administrativas y Económicas, Calle 18 No. 122 -135, Cali, Colombia.
Abstract:
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.
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