Eftychia Nikolaidou

Investigating the Determinants of Nonperforming Loans in the Romanian Banking System: An Empirical Study with Reference to the Greek Crisis

This paper aims to investigate the determinants of nonperforming loans in the Romanian banking sector by means of time series modelling. It is motivated by the hypothesis that macroeconomic-cyclical indicators, monetary aggregates, interest rates, financial markets, and bank-specific variables influence the nonperforming loans in the Romanian banking system. Using monthly series that span from December 2001 to November 2010, we cover both the booming period and the recent financial crisis. Given the significant presence of the Greek banks in Romania, the novelty of the paper lies in the introduction of variables that proxy the Greek crisis. Thus, we examine the existence of a potential transmission channel to the Romanian banking system by investigating the impact of the Greek crisis to the Romanian nonperforming loans. Our findings indicate that macroeconomic variables, specifically the construction and investment expenditure, the inflation and the unemployment rate, and the countrys external debt to GDP and M2 jointly with Greek crisis-specific variables influence the credit risk of the Romanian banking system. The results have several implications for policymakers, regulators, and managers as the most recent published stress tests on the Romanian banking system are based on end 2008 data.

Defence Spending and Economic Growth in the EU15

Over the last 30u2009years, there has been an impressive amount of empirical work on the defence–growth nexus, using different methodologies, models and econometric techniques and focusing on individual case studies, cross-country studies or panel data studies. Despite the number and the variety of studies, the evidence on the defence–growth relationship is still far from conclusive. Rather surprisingly, very limited work has been published in the relevant literature for the European Union despite the continuous discussions for a Common European Defence Policy that would require an assessment of the economic effects of defence in this region. To fill in the gap in the literature, this paper employs an augmented Solow–Swan model and estimates it both with panel and time series methods to provide empirical evidence on the economic effects of defence spending in the EU15 over the period 1961–2007. Overall, evidence derived from both panel and time series methods is consistent and suggests that military burden does not promote economic growth in this region.

Credit Risk in the Romanian Banking System: Evidence from an ARDL Model

This paper provides empirical evidence on the determinants of credit risk in the Romanian banking system over the period December 2001 to November 2010 by employing the Autoregressive Distributed Lag (ARDL) approach to cointegration. This approach allows us to investigate both the long-run and the short-run determinants of credit risk and has only recently been employed in the relevant literature. Empirical findings indicate that bank specific factors (credit growth) as well as macroeconomic activity factors (money supply and unemployment) all have a significant impact on Romania’s credit risk both in the short and in the long-run. Furthermore, the findings strongly support our hypothesis that the Greek crisis has a significant impact on Romanian non-performing loans.

DEFENCE SPENDING, ECONOMIC GROWTH, CORRUPTION AND INEQUALITY

This special issue includes papers that stem from the 13th Annual International Conference on Economics and Security that was held at CITY College in Thessaloniki, Greece from 24 to 26 June 2009. The conference was organised by the Business Administration and Economics Department of CITY College and had the support of the University of the West of England, Economists for Peace and Security (UK), Economists for Peace and Security (US), The British University in Egypt (BUE) and the South-East European Research Center (SEERC) in Thessaloniki, Greece. The Conference covered a wide range of topics – both theoretical and applied in nature – on economics and security. Participants included scholars and researchers from academic institutions and research centres in Greece, Turkey, the UK, the USA, Israel, Portugal, Slovenia, Bulgaria, the Czech Republic, Italy, France, Sweden, Switzerland, Egypt, Australia, South Africa, Spain, Germany, the Netherlands, Norway, Belgium, China, Colombia and Sweden. Among defence and peace economists, an issue that remains unresolved and as such still attracts a lot of research interest is the economic effects of defence spending and the potential corruption and inequality that are associated with military spending. Drawing on this, this special issue includes five papers that attempt to give answers to questions like: does defence spending promote or hinder economic growth? Is there a trade-off between defence spending and other forms of public expenditure (i.e. education, health)? Is the impact of military spending different in developed and non-developed countries and countries that face various conflicts? And finally, is defence spending associated with corruption, and if so, what is the impact on the countries’ economic growth? Specifically, the first paper by Dunne and Nikolaidou provides empirical evidence on the defence–growth relationship by focusing on the 15 core European Union countries (EU15). The paper argues that despite the importance of this region in the global economic scene and despite the continuous discussions for a common European defence policy, the issue of the economic effects of defence spending has been under-researched for this region. The authors following Dunne et al. (2005) and Knight et al. (1996) estimate an augmented Solow growth model with Harrod-neutral technical progress over the period 1961–2007. They highlight the degree of heterogeneity among the 15 countries in terms of economic development, military spending and defence industries, and as such, they do not consider a simple pooling of the data appropriate. Instead, in order to allow for unobserved heterogeneity across countries, they use fixed and random effects methods and they also provide individual time series estimates for each of the 15 countries where the possibility of country-specific dummies is taken into consideration. Their results are relatively consisDefence and Peace Economics, 2012 Vol. 23(6), December, pp. 533–535