The research paper investigates the correlation between Gross Domestic Product, total declared and paid wages by Macedonian real economy and the level of nonperforming retail loans in the Republic of Macedonia in the period of the last quartile of 2010 till to first quartile of 2012 The examination of the feedback effect broadly confirms the strong correlation between real economy and nominal economy. From the analysis carried out, it was found that the level of NPLS in retail banking is directly attributed by ups and downs within the business cycle. Moreover, the research paper indicates that NPLs in retail loans responds to volatility in real economy, where increase or NPLs is perfectly negatively correlated to economic growth rate. Correlation analysis with SPSS 17.0 was used to administrate this research study.
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