The Impact of Macroeconomic Uncertainty on Bank Lending Behavior

Mustafa Caglayan (), Neslihan Ozkan and Christopher Baum

No 2002_02, Working Papers from University of Liverpool, Department of Economics

Abstract: In this paper we empirically investigate the link between bank lending and macroeconomic uncertainty using annual and quarterly U.S. bank level data. For both data sets, we show that as macroeconomic uncertainty increases, captured by an increase in the variability of industrial production or inflation, banks behave more conservatively, leading to a narrowing of the cross-sectional distribution of banks' loan--to-asset ratios. Our results are robust to the inclusion of macroeconomic factors, and provide broadly similar findings across three major categories of bank loans and total loans.

Keywords: Bank lending; macroeconomic uncertainty; panel data; ARCH (search for similar items in EconPapers)
JEL-codes: C22 C23 D81 E51 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (22)

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Working Paper: The Impact of Macroeconomic Uncertainty on Bank Lending Behavior (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:2002_02

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