Unit Roots and Co-Integration Tests: the Effects of Consumer Price Index (CPI) on Non-Performing Loans (NPL) in the Banking Sector in Malaysia

by Mohd Yaziz Bin Mohd Isa and Zulkifflee Bin Mohamed

Journal of Advanced Statistics, Vol. 2, No. 1, March 2017

Abstract

The purpose of this study is to examine whether there is any genuine long run relationship between Consumer Price Index (CPI) and Non-Performing Loans (NPL). Using the logarithmic values of Consumer Price Index (CPI) inflation and Non-Performing Loans (NPL), different methodologies are employed in the analysis so that the robustness of unit roots and cointegration results is guaranteed. Based on the results, we consistently do not observe any genuine long run relationship between the two variables.

 

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