Does economic uncertainty affect the soundness of banks? Evidence from emerging Asian economies

Ji Wu, Yao Yao, Minghua Chen and Bang Jeon

Journal of Asian Economics, 2021, vol. 77, issue C

Abstract: This paper examines the impact of economic uncertainty on four dimensions of banking soundness, namely, banks’ loan growth rates, interest rate spreads, capitalization and risk. By using the bank-level panel data of approximately 500 commercial banks in seven emerging Asian economies, we find consistent evidence that increased economic uncertainty decelerates banks’ loan growth, narrows their interest rate spreads and aggravates their risk, but induces banks to increase their capital holdings. Our results are shown to be robust in a series of checks that use alternative indicators of economic uncertainty and econometric methodologies.

Keywords: Economic uncertainty; Banking soundness; Emerging Asian economies (search for similar items in EconPapers)
JEL-codes: G15 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:77:y:2021:i:c:s1049007821001238

DOI: 10.1016/j.asieco.2021.101394

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