Int. J. Monetary Economics and Finance, Vol. 12, No. 1, 2019 15 Copyright © 2019 Inderscience Enterprises Ltd. Macroeconomic determinants of credit risk: a P-VAR approach evidence from Europe Ahlem-Selma Messai* University of Economics and Management of Mahdia, University of Monastir, Monastir, 5000, Tunisia Email: asm_j@hotmail.fr *Corresponding author Mohamed Imen Gallali Higher Business School of Tunis, University of Manouba, Manouba, 2010, Tunisia Email: gallalim@yahoo.fr Abstract: The aim of this study is to develop a macroprudential approach in order to determine the most relevant factors able to explain the emergence of non-performing loans (NPL). For this purpose, we estimate an econometric model for analysing interrelationship among non-performing loans and the determinants of the credit risk in 18 European countries by using a panel vector autoregressive (PVAR) approach during the period 2000–2011. This study implies that credit risk determinants are similar to early warning indicators. Our empirical results show a bi-directional causal relationship between the credit risk evolution and four variables (GDP growth rate, unemployment rate, the stock price index and the non-performing loans). Keywords: macroprudential approach; credit risk; NPL; non-performing loans; PVAR approach. Reference to this paper should be made as follows: Messai, A-S. and Gallali, M.I. (2019) ‘Macroeconomic determinants of credit risk: a P-VAR approach evidence from Europe’, Int. J. Monetary Economics and Finance, Vol. 12, No. 1, pp.15–24. Biographical notes: Ahlem-Selma Messai is an Assistant Professor of Finance at the Faculty of Economics and Management of Mahdia. Her research interests are risk management, finance, earnings management, and corporate governance. She belongs to the research laboratory Risk Management and Research in Accounting and Finance (RIM-RAF) at the Higher Business School of Tunis, Manouba. Mohamed Imen Gallali is a Professor, and he is the Director of the Research Laboratory RIM RAF at the Higher Business School of Tunis (Manouba University). His research interests are risk management, finance, earnings management, financial reporting and corporate governance.