Privredna kretanja i ekonomska politika  god. 24  br. 2 (137)  2015. 7 The Drivers Behind Household and Corporate Non-performing Loans Ratio: The Case of Croatia RESEARCH ARTICLE Ivana Tomas Žiković * Saša Žiković ** Andrea Arbula Blecich *** Abstract We analyze the relationship between non-performing loans (NPL) ratio and Croatia’s macroeconomic performance in the 4Q2001-1Q2014 period. Analysis is performed separately for two different loan categories (households and corporate) in order to examine their similarities and differences. Our results show that the NPL ratio for both categories is strongly affected by the economic slowdown measured by the real GDP and industrial production index. This confirms the significant effect of economic cycles on households’ and companies’ ability to service their liabilities, especially during recession. Unemployment rate is found to be significant for corporate sector and is positively related to corporate NPL ratio. Interest rates have mixed implications on the NPL for both categories depending on the duration of the observation period. In the long run we find a positive relationship between interest rates and NPL ratio, meaning that in the long run higher interest rates worsen the debtors’ loan repayment capacity and refinancing terms. In the short run we find a negative relationship between interest rates and NPL ratio which can be * Ivana Tomas Žiković, Assistant Professor, Faculty of Economics, University of Rijeka, e-mail: itomas@efri.hr. ** Saša Žiković, Associate Professor, Faculty of Economics, University of Rijeka, e-mail: szikovic@efri.hr. *** Andrea Arbula Blecich, Teaching and Research Assistant, Faculty of Economics, University of Rijeka, e-mail: aarbula@efri.hr. ČLANCI