Can Italy grow out of its NPL overhang? A panel threshold analysis

This paper examines whether a tipping point exists for real GDP growth in Italy above which the ratio of non-performing loans (NPLs) to total loans falls significantly. Estimating a heterogeneous dynamic panel-threshold model with data on 17 Italian regions over the period 1997-2014, we find that growth above 1.2%, if sustained for a number of years, is associated with a significant decline in the NPL ratio.