Economic Policy Uncertainty Effects on Credit and Stability of Financial Institutions

6 Pages Posted: 5 May 2020

See all articles by Mustafa Caglayan

Mustafa Caglayan

Heriot-Watt University - School of Management and Languages

Bing Xu

Heriot-Watt University

Date Written: July 2019

Abstract

We examine policy‐related economic uncertainty effects on the availability of credit, non‐performing loans and loan loss provisions using a panel of 18 countries. We provide significant evidence that uncertainty reduces the availability of credit while leading to increases in banks' non‐performing loans and loan loss provisions, distorting sectoral stability. Our findings are economically meaningful.

Keywords: economic policy uncertainty, financial depth, financial institutions, non‐performing loans, provisions

JEL Classification: C22, C23, D81, E51

Suggested Citation

Caglayan, Mustafa and Xu, Bing, Economic Policy Uncertainty Effects on Credit and Stability of Financial Institutions (July 2019). Bulletin of Economic Research, Vol. 71, Issue 3, pp. 342-347, 2019, Available at SSRN: https://ssrn.com/abstract=3590652 or http://dx.doi.org/10.1111/boer.12175

Mustafa Caglayan (Contact Author)

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom

Bing Xu

Heriot-Watt University ( email )

Riccarton
Edinburgh, EH14 1AS
United Kingdom

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