Bank Lending in Uncertain Times

59 Pages Posted: 8 May 2017

Date Written: May 3, 2017


We study the impact of economic uncertainty on the supply of bank credit using a monthly dataset that includes all loan applications submitted by a sample of 650,000 Italian firms between 2003 and 2012. We find that an increase in aggregate uncertainty has three effects. First, it reduces banks' likelihood to accept new credit applications. Second, it lengthens the time firms have to wait for their loans to be released. Third, it makes banks less responsive to fluctuations in short-term interest rates, weakening the bank lending channel of monetary policy. The influence of uncertainty is relatively stronger for poorly capitalized lenders and geographically distant borrowers.

Keywords: uncertainty, credit supply, bank lending channel, loan applications

JEL Classification: E51, G20

Suggested Citation

Alessandri, Piergiorgio and Bottero, Margherita, Bank Lending in Uncertain Times (May 3, 2017). Bank of Italy Temi di Discussione (Working Paper) No. 1109, Available at SSRN: or

Piergiorgio Alessandri

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Margherita Bottero (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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