ANALYSIS OF FACTORS INFLUENCING NON-PERFORMING LOANS IN THE BANKING SECTOR OF MONGOLIA

Abstract

This study investigates the macroeconomic and bank-specific factors influencing the level of non-performing loans (NPLs) in Mongolia’s banking sector between 2016 and 2023. Using quarterly time-series data and applying Johansen cointegration and Vector Error Correction Model (VECM), the analysis finds that exchange rate volatility, inflation, and GDP growth rate significantly affect NPL ratios. The results reveal a strong short-run relationship with inflation and exchange rate, while GDP growth shows long-term impact. Policy recommendations focus on enhancing credit risk monitoring, promoting macroeconomic stability, and strengthening banking supervision to reduce systemic risks.