Do global and local economic policy uncertainties matter for systemic risk in the international banking system

Yuanyue Deng and Sijing Li

Finance Research Letters, 2024, vol. 59, issue C

Abstract: Using panel data from 60 countries spanning from January 2006 to December 2021, we investigate how economic policy uncertainties (EPUs) affect two subcomponents of systemic risk (systemic linkage and individual risk), and differentiate the influences resulting from global and local EPU shocks. Our findings demonstrate that increased global shocks result in higher systemic linkages, while domestic uncertainties significantly contribute to individual risks. Cross-border bank loans and non-performing loans serve as the channels through which EPUs induce cascading effects. Moreover, heterogeneity analysis reveals the roles of financial openness and financial development in shaping the EPUs–systemic risk nexus.

Keywords: Banking system; Economic policy uncertainty; Individual risk; Systemic linkage (search for similar items in EconPapers)
JEL-codes: C10 F02 G15 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011248

DOI: 10.1016/j.frl.2023.104752

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